Fifth Circuit Confirms "Pump and Dumps Aren’t Legal After All"

I guess pump and dumps aren’t legal after all

So, I guess pump and dumps aren’t legal after all. Or so says the Fifth Circuit….[…]

The defendants claimed that the goal of their scheme wasn’t to deprive their followers of property, but simply to enrich themselves. The Southern District of Texas, relying on the Supreme Court’s decision in Ciminelli v. United States, concluded that the defendants could not have committed securities fraud or conspired to commit securities fraud because the victims were not necessarily buying the shares from the defendants and were therefore only deprived of economically valuable information (i.e. the fact that the defendants intended to sell)….

This struck me as absurd at the time, and it looks like the Fifth Circuit agrees. In a very short seven-page opinion, the Fifth Circuit said that securities fraud is still securities fraud, even when the money flows through the black box that is the public securities markets. Both money and common shares of specific public companies are fungible, and securities fraud in public markets has never required direct tracing of proceeds to recipients of the false information. Rejecting the argument that the defendants only wanted to make themselves rich, not to harm their victims, the Court rightly notes that this is “a distinction without a difference.”

Chastain: Pushing the Boundaries of Insider Trading

Insider trading cases may have become harder to prosecute. On July 31, 2025, the Second Circuit released its opinion in United States v. Chastain, an insider trading case in which the defendant had been convicted by a jury for misappropriating confidential information belonging to his employer and using that information to trade for personal gain. That sounds like garden variety insider trading, except here, there was a twist. Whereas most criminal insider trading cases are charged as securities fraud, here the defendant was tried and convicted under the wire fraud statute. The Second Circuit reversed the conviction, and in so doing substantially narrowed the extent to which the wire fraud statute protects against an employee’s misuse of a company’s confidential information. Specifically, the Second Circuit found that the wire fraud statute’s prohibition against misappropriating an employer’s “property” extends only to information that has commercial value to the employer. Information that is of value to an employee for trading purposes—but that lacks commercial value to the employer—is fair game.

While the criminal wire fraud and securities fraud statutes are distinct, they share a common nucleus in their definition of ‘property’. The Second Circuit’s decision could thus have wide-ranging impact upon prosecutions concerning securities fraud, too. The impact could grow further when considering the possible impacts upon civil actions under Rule 10b-5. This client alert discusses the Chastain decision and its potential impact on defending insider trading in securities and commodities cases.

SEC Faces Mounting Backlog With 91% of Staff Furloughed, Based on Agency Shutdown Plans

Despite the shutdown, companies can still file registration statements and applications that require SEC staff engagement, but those—and any investigations—are all on hold, said attorney David Fredrickson.

Staff “will have to come back and pick up the pieces and figure out how to make up lost time and move quickly as possible,” said Fredrickson, now a Covington & Burling senior of counsel.

Frederickson said that, while the SEC now has a well-worn playbook in dealing with shutdowns, the commission’s 15% reduction in force this fiscal year makes matters more difficult. The Trump administration has also threatened mass layoffs of federal workers during the funding lapse.

While it is unclear whether SEC staff will be further reduced, “it’s certainly not outside the realm of possibility that they could come back with less people to deal with the backlog,” said Adams, now a partner at Morrison Foerster.

Is Your Boss ‘Working From Yacht’?

Jimmy John Liautaud, the billionaire proprietor of the sandwich chain Jimmy John’s and a serial yacht owner, is also a serial workaholic.

“When I’m on my boat, I work on my boat. When I’m on my plane, I work on my plane. When I’m in my car, I work in my car. And when I’m at my house, I work in my house. It doesn’t stop,” he says. “I work everywhere I am. But it’s obviously pretty sweet to be able to do deals or make decisions anchored off the Seychelles.”

Pretty much anyone can WFH, but only the .001% are WFY—working from yacht. As superyachts have become a staple of the billionaire class, owners and designers have taken pains to turn multimillion-dollar pleasure vessels into well-appointed floating offices, outfitted with executive desks, sleek wall art and high-speed internet. Brokers and designers say more and more of their ultra-high-net-worth clients are asking for these build-outs from the outset.

“Almost every single large new build that I’ve been involved with in the past few years has a designated office space on board,” says Alex Clarke, a yacht broker with Denison Yachting in Fort Lauderdale, Florida. These, he says, aren’t just desks but private quarters and meeting rooms meant to accommodate a flexible approach to work.

Sports Bets at the Stock Exchange

And so the story here is kind of “the New York Stock Exchange is getting into the sports betting business.” Because the thing that you do, on a first-order basis, at the New York Stock Exchange, is make bets on stocks. You use gut instinct or data or whimsy or computers to pick the stocks you think will go up, and you buy them. And at some level the purpose of the New York Stock Exchange is to allocate capital to its best uses, but at another level the purpose of the New York Stock Exchange is to give you the bets you want, and if you want to bet on sports then bet on sports.4 Bloomberg’s Joe Weisenthal writes today:

“It seems like every company in the trading world is melding into some prediction market/sports betting/crypto conglomerate. All the lines between speculation and hedging or gambling and investing are going away.”