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Potential Criminal and Civil Penalties of Digital Asset Exchanges

By Nola B. Heller and Samson Enzer
January 01, 2022

Imagine the following. An employee of the proprietary trading arm of a digital asset trading exchange learns confidential information from a colleague in another division that their employer will soon be publicly listing a new cryptocurrency token for trading on the exchange. The trading employee buys units of the token for the exchange's benefit and for his own account before the public learns of the upcoming listing, the units' market price skyrockets when the listing is announced, and the employee sells the units at a profit.

The risks that can arise from such insider trading are not merely hypothetical in the cryptocurrency industry. For example, several news outlets recently reported that criminal and regulatory authorities have opened investigations into potential insider trading in digital assets at one of the largest digital asset exchanges in the world.

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