{"id":7259,"date":"2021-09-10T12:11:31","date_gmt":"2021-09-10T16:11:31","guid":{"rendered":"https:\/\/navesinkinternational.com\/?p=7259"},"modified":"2023-12-20T13:58:13","modified_gmt":"2023-12-20T18:58:13","slug":"insider-trading-mr-branson","status":"publish","type":"post","link":"https:\/\/navesinkinternational.com\/2021\/09\/10\/insider-trading-mr-branson\/","title":{"rendered":"Insider trading, Mr. Branson?"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"7259\" class=\"elementor elementor-7259\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-72dc968d e-flex e-con-boxed e-con e-parent\" data-id=\"72dc968d\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-d6cad73 elementor-widget elementor-widget-text-editor\" data-id=\"d6cad73\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.21.0 - 25-04-2024 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignright size-medium wp-image-13219\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2023\/12\/Virgin-air-balloon-300x225.jpg\" alt=\"\" width=\"300\" height=\"225\" srcset=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2023\/12\/Virgin-air-balloon-300x225.jpg 300w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2023\/12\/Virgin-air-balloon.jpg 640w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/>Virgin Galactic&#8217;s successful flight may have brought joy to Mr. Branson, but it will also bring some after-party headaches.<\/p><p>The entrepreneur and space explorer is accused of basic earthly financial misgivings for this same flight &#8211; a pretty serious insider trading issue.<\/p><p>\u00a0<\/p><h3>The facts<\/h3><ul><li>On its inaugural flight this last July 11th, <span style=\"text-decoration: underline;\">Branson&#8217;s spacecraft deviated from its trajectory<\/span>.<\/li><li>The <span style=\"text-decoration: underline;\">yellow light<\/span> warning, a big deal for pilots, <span style=\"text-decoration: underline;\">was ignored<\/span>. The plane did not abort its descent as should have been expected. Instead, it flew out of the permitted cone for 1 min and 42 seconds.<\/li><li>An uncontrolled descent carries a significant <span style=\"text-decoration: underline;\">risk of explosion<\/span>. It&#8217;s a big deal for the FAA, which <span style=\"text-decoration: underline;\">automatically suspends the plane<\/span> until an investigation is completed and its result is favorable.<\/li><li>The next day, on July 12th, Branson <span style=\"text-decoration: underline;\">announced to the SEC<\/span> that he would sell shares in the company. Branson <span style=\"text-decoration: underline;\">did not mention the flight incident<\/span> in doing so.<\/li><li>On July 23rd, the FAA started an <span style=\"text-decoration: underline;\">investigation<\/span>.<\/li><li>Mr. Branson <span style=\"text-decoration: underline;\">sold 10.5m shares worth $300m<\/span> on August 10th, 11th, and 12th. He confirmed the sale publicly on August 13th.<\/li><li>The flight <span style=\"text-decoration: underline;\">deviation became public knowledge on September 1st<\/span>, in an investigative article from The New Yorker (below)<\/li><li>On September 2nd, the <span style=\"text-decoration: underline;\">FAA grounded the plane<\/span> until further notice.<\/li><\/ul><p>\u00a0<\/p><h3>Insider Trading?<\/h3><p>Could this sale fall into the insider trading fraud? Here are the ingredients required:<\/p><ol><li>Was Mr. Branson a &#8220;controlling person&#8221;?<\/li><li>Did he execute a securities transaction?<\/li><li>Did he possess non-public information?<\/li><li>Was the information material?<\/li><li>Did he breach his fiduciary duty?<\/li><li>Was there scienter?<\/li><\/ol><p>What do you think? The court will decide, but he may have a challenging time ahead.<\/p><p>\u00a0<\/p><h3>Tom Hardin&#8217;s initial comment<\/h3><p><img decoding=\"async\" class=\"wp-image-7275 alignright size-medium\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-240x300.jpg\" alt=\"Tom Hardin\" width=\"240\" height=\"300\" srcset=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-240x300.jpg 240w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-819x1024.jpg 819w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-768x960.jpg 768w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-1229x1536.jpg 1229w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-1638x2048.jpg 1638w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-1080x1350.jpg 1080w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-1280x1600.jpg 1280w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-980x1225.jpg 980w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-480x600.jpg 480w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-1320x1650.jpg 1320w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Tom-Hardin-scaled.jpg 2048w\" sizes=\"(max-width: 240px) 100vw, 240px\" \/><a href=\"https:\/\/tipperx.com\/about-us\/\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Tom Hardin<\/a> is known as &#8220;TipperX&#8221;, <a href=\"https:\/\/www.institutionalinvestor.com\/article\/b1b34339bnyvd6\/He-Broke-the-Law-He-Got-Caught-Then-He-Wore-a-Wire\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">one of the most prolific informants in securities fraud history<\/a>, helping to build over 20 of the 80+ individual criminal cases in \u201cOperation Perfect Hedge.\u201d He now lectures on the insider trading topic. Here is his initial comment on the case:<\/p><p style=\"padding-left: 40px;\">&#8220;<em>While it appears to be (1) material, (2) non-public information on which Mr. Branson traded, illegal insider trading must also include a third element: deception and\/or breach of fiduciary duty. In other words, when the insider illegally acts on their information, they do so despite their duty to the company; they&#8217;re keeping a secret from the firm which doesn&#8217;t want traders acting on this information yet. This takes advantage of the trust placed in them by a company&#8217;s owners and shareholders. That breach of trust is the heart of why insider trading is illegal. Not knowing all of the facts of the case, in a hypothetical situation, Mr. Branson would most certainly try to argue there was no breach of duty.&#8221;<\/em><\/p><p>\u00a0<\/p><h3>The potential outcome<\/h3><p>Insider trading is seriously punished in the US, with both civil and criminal penalties. They include<\/p><p><img decoding=\"async\" class=\"wp-image-7268 alignleft size-medium\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Richard-Branson-Virgin-Galactic-Flight-team-300x169.jpg\" alt=\"Richard-Branson-Virgin-Galactic-Flight-team\" width=\"300\" height=\"169\" srcset=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Richard-Branson-Virgin-Galactic-Flight-team-300x169.jpg 300w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Richard-Branson-Virgin-Galactic-Flight-team-1024x576.jpg 1024w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Richard-Branson-Virgin-Galactic-Flight-team-768x432.jpg 768w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Richard-Branson-Virgin-Galactic-Flight-team-1080x608.jpg 1080w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Richard-Branson-Virgin-Galactic-Flight-team-980x551.jpg 980w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Richard-Branson-Virgin-Galactic-Flight-team-480x270.jpg 480w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Richard-Branson-Virgin-Galactic-Flight-team.jpg 1280w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/p><ul><li>Disgorgement of profits, forfeiture<\/li><li>Penalties: the greater of $1 million or 3x profits<\/li><li>Fines: up to $5,000,000 or 2x profits<\/li><li>Disbarment, as a director or as a broker-dealer\/investment advisor<\/li><li>Up to 20 years imprisonment<\/li><\/ul><p>Enough stakes for a great party&#8230;<\/p><p>You actually don&#8217;t need to be a &#8220;controlling person&#8221; anymore these days, as the fraud has been extended to &#8220;tippees&#8221; and &#8220;tippers&#8221;, since they also breach fiduciary duties.<\/p><p>\u00a0<\/p><p>\u00a0<\/p><p>So let&#8217;s see how that goes, but this story is not likely to disappear any time soon.<\/p><p>\u00a0<\/p><p>\u00a0<\/p><h4>References<\/h4><ul><li>Business Insider, September 9th, 2021: <a href=\"https:\/\/www.businessinsider.com\/virgin-galactic-branson-sold-stock-stayed-quiet-flight-mishap-faa-2021-9\" target=\"_blank\" rel=\"noopener\">Virgin Galactic and Richard Branson sold $800 million in stock before investors knew about an in-flight &#8216;mishap&#8217; that would trigger an FAA investigation<\/a><\/li><li>The New Yorker, September 1st, 2021: <a href=\"https:\/\/www.newyorker.com\/news\/news-desk\/the-red-warning-light-on-richard-bransons-space-flight\" target=\"_blank\" rel=\"noopener\">The Red Warning Light on Richard Branson\u2019s Space Flight<\/a><\/li><li><a href=\"https:\/\/www.google.com\/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwivxN6aiPPyAhWEneAKHcdTAiYQFnoECBcQAQ&amp;url=https%3A%2F%2Fresources.calstrs.com%2Fpublicdocs%2FPage%2FCommonPage.aspx%3FPageName%3DDocumentDownload%26Id%3D8c4cd6c8-dd78-4079-82be-db9e0ddb45d2&amp;usg=AOvVaw34Gex-yvyHVtRtnFvb4Or0\" target=\"_blank\" rel=\"noopener\">Elements of Insider Trading<\/a>, CalSTRS.com<\/li><\/ul><p>\u00a0<\/p><p><iframe style=\"background: white;\" src=\"https:\/\/www.newyorker.com\/news\/news-desk\/the-red-warning-light-on-richard-bransons-space-flight\" width=\"100%\" height=\"650\"><\/iframe><\/p><p><a href=\"https:\/\/www.businessinsider.com\/virgin-galactic-branson-sold-stock-stayed-quiet-flight-mishap-faa-2021-9\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-7264 aligncenter size-full\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Business-Insider-Article-scaled.jpg\" alt=\"Virgin Galactic and Richard Branson sold $800 million in stock before investors knew about an in-flight 'mishap' that would trigger an FAA investigation - Business Insider\" width=\"541\" height=\"2560\" srcset=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Business-Insider-Article-scaled.jpg 541w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Business-Insider-Article-768x3635.jpg 768w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Business-Insider-Article-433x2048.jpg 433w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/09\/Business-Insider-Article-480x2271.jpg 480w\" sizes=\"(max-width: 541px) 100vw, 541px\" \/><\/a><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Virgin Galactic&#8217;s successful flight may have brought joy to Mr. Branson, but it will also bring some after-party headaches.<br \/>\nThe entrepreneur and space explorer is accused of basic earthly financial misgivings for this same flight &#8211; a pretty serious insider trading issue.<\/p>\n","protected":false},"author":1,"featured_media":13219,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[11,13],"tags":[157,295,296,63,299,298,297],"acf":[],"_links":{"self":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/7259"}],"collection":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/comments?post=7259"}],"version-history":[{"count":5,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/7259\/revisions"}],"predecessor-version":[{"id":13222,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/7259\/revisions\/13222"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/media\/13219"}],"wp:attachment":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/media?parent=7259"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/categories?post=7259"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/tags?post=7259"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}