Note that they were charged for wire fraud and wire fraud conspiracy. So not for actual Section 10(b) violations, aka insider trading.
The explanation I found “Mail fraud and wire fraud are terms used to describe the use of a physical or electronic mail system to defraud another” doesn’t really help me further, other than it just being “fraud”.
What would be the difference between insider trading and fraud, in this specific case? Would it mean that someone basically enriched themselves with Coinbase without it being through trades (just to name an example, skimming rounding inaccuracies in your favor) ?
The way it prosecutes fraud here is by observing that it's over electronic wires which cross state lines.
Mail fraud is similar. If you send someone a letter, you're using the US Mail system and thus are involving the federal level making it a federal crime. If you exclusively use a private interstate letter carrier (FedEx, for example), you are still committing mail fraud because the law was amended to cover that.
Nowadays, it's very hard to commit financial fraud without also committing wire fraude.
In this case, because the trades were made via digital communications, it’s wire fraud. The reason you hear “wire fraud” so much is, as you might be able to guess, the vast majority of fraud these days takes place over the web.
In this case the indictment is “wire fraud in connection with a scheme to commit insider trading”. So it is both wire fraud and securities fraud. Generally speaking, the relevant information will be whatever specific fraud they are accused of committing over the wire, and not that it is the incredibly generic term wire fraud.
Insider trading is specifically about rules around trading securities.
In this case the allegation has nothing to do with securities trading, it's about an employee defrauding their employer by misappropriating privileged information.
Fraud is generally about deceiving people. Wire fraud is specifically about deceiving people using telecommunications devices - imagine when telephones first became popular - a fraudster before had to go knock on every door, expose his face to the town, and possibly be driven out if people found out what he was doing. With telephones, the fraudster could sit in a loft in NYC and call thousands of people all over the country with their fraud, and there would be very little anyone could do to stop them.
The problem with that is state laws and capabilities are inconsistent. Even in New York, where there is a well established body of law for things like financial frauds, the local prosecutors make lack capability or venue. If you live in Lake Placid, NY and are scammed, it’s unlikely that the Essex County DA (probably 4 attorneys) has the capability to prosecute a complex financial crime. If you live in Manhattan, different story - that DA has thousands of attorneys and expertise.
The Federal government side-steps turf issues and inequity by using more “umbrella” laws that are easy to approve. If you commit a fraud that has a connection to the mail, “Mail Fraud”. If you use a phone, “Wire Fraud”. If you take money that isn’t yours from an FDIC insured bank, that’s a Federal crime. If you lie to a Federal agent, that’s a crime.
The Senate is by design very conservative (or regressive depending on POV). Stuff gets done by squinting at the law and finding new ways to get shut done.
I think this is a pretty novel charge and IMHO isn't going to stick. They're going to have to prove an intent to deceive and deceive specifically to "insider trade". Agreeing not to disclose and then disclosing isn't in itself fraud. You have to plan to disclose prior to that agreement to make it fraud.
"First, I need to get a 65 year old Federal prosecutor to understand what this case is about. Then, they need to be able to potentially argue the case in court and to a jury that almost always has no idea what any of this means."
He goes on to say that wire fraud is essentially a universal catch-all charge that distills the crux/burden of the case to two facts:
1) They committed fraud.
2) They touched a computer while doing it.
These two points are much easier to argue, prove, and most importantly get a jury to understand (and convict on). Even though most federal prosecutions result in a plea deal of some sort the simplicity of arguing and proving wire fraud results in a much higher rate of success for a favorable plea deal and/or the threat of going to trial with a crime that's so easy to prove.
So they're looking at maximum 40 years. One of them is charged with two counts on each, so 80 years max.
It's not a light deal...
You can't "insider trade" FX, for example. Likewise, you cannot "insider trade" crypto.
It's fair to characterize these criminal charges as "insider trading" (I assume; the DoJ press release describes them using that phrase).
participated in a scheme to deprive
Coinbase of its exclusive use of
confidential business information
related to Coinbase's plans to list
certain crypto assets on its exchanges