Market Overview

Feds Investigate Senators For Insider Trading Ahead Of Coronavirus-Caused Stock Market Crash

Feds Investigate Senators For Insider Trading Ahead Of Coronavirus-Caused Stock Market Crash

The Department of Justice is probing lawmakers for accusations that they dumped stocks based on privileged information about the novel coronavirus (COVID-19) outbreak, CNN reported Monday.

What Happened

The Securities and Exchange Commission is also participating in the investigation, two people familiar with the matter told CNN.

Officials from the Federal Bureau of Investigations have reached out to at least one of the accused lawmakers, Senator Richard Burr, seeking more information on the trades, CNN noted.

Burr sold stocks worth between $628,000 and $1.7 million on February 13 in 33 separate transactions, as shown by his congressional records and reported earlier by ProPublica.

The North Carolina senator serves as the chairman of the Senate Intelligence Committee, and that means he was receiving daily updates on COVID-19.

Alice Fisher, a lawyer for Burr, said in a statement to the media on Sunday that the senator will cooperate with any "appropriate inquiry" into the matter, including by the Senate Ethics Committee.

"The law is clear that any American -- including a Senator -- may participate in the stock market based on public information, as Senator Burr did," the lawyer said.

Recently-elected Georgia Senator Kelly Loeffler, whose husband is the chairman and CEO of the Intercontinental Exchange (NYSE: ICE), also sold stocks worth millions of dollars ahead of the financial crash, as reported earlier by the Daily Beast.

California Senator Dianne Feinstein and Oklahoma Senator James Inhofe were reported to have made smaller transactions around the same time.

Loeffler, Feinstein, and Inhofe haven't been approached by the FBI yet for inquiry, their respective offices confirmed to CNN.

Why It Matters

The stock market crashed as COVID-19 took hold in the United States in early March, including the worst single-day drop since the "Black Monday" of 1987 on March 12.
The senators made the sales at a time when the federal government, including Burr and Loeffler, were assuring the American public that the U.S. is ready to mitigate the coronavirus outbreak.

"The consumer is strong, the economy is strong, [and] jobs are growing, which puts us in the best economic position to tackle [COVID-19, and] keep Americans safe," Loeffler said on Twitter, following a meeting with President Donald Trump and senior healthcare officials, as she sold a significant amount of her stocks.

The Stop Trading on Congressional Knowledge Act of 2012 makes it illegal for legislators to use privileged information for making stock transactions.

The prosecutors will need to prove that the senators acted on such inside information when making the decisions relating to their stock transactions.


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