Follow the Money: Insider Trading

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When a company is acquired or merged with another, its stock prices generally rise. Therefore, knowing early about a merger or acquisition presents the opportunity for quick and guaranteed profits. If you knew with certainty who was going to win the Super Bowl next year, it might be hard to resist making a bet. But if you shift that analogy from the world of sports to the world of business and stocks, making such a bet might get you charged with insider trading.

Broadly defined, insider trading is the use of non-public information to execute trades of stocks and securities. But there is a lot of context to consider in each individual case. If two corporate executives know that their company is about to be acquired—but the public does not know yet—those executives would be guilty of insider trading if they made trades based on their private knowledge. Now, if those same two hypothetical corporate executives were talking about how their company was about to be acquired, and someone unrelated to the company overheard them and traded on the knowledge, it might not be illegal at all. And it can get more complicated than that—but also more interesting.

R. Foster Winans and WSJ’s “Heard on the Street” Column

In the early 1980s, R. Foster Winans wrote a regular column for the Wall Street Journal called “Heard on the Street.” Since he had a wide readership, the stock of the companies he wrote about would—depending on his take—rise and fall. Then, the crime: Winans began to share the contents of his columns with a group of stockbrokers before the columns were published. These brokers bought or sold before the wider market could receive the same information, and thereby earned a safe profit, some of which they kicked back to Winans.

While Winans made comparatively little from this venture (estimated to be just over $30,000), the case against him has had a lasting impact. When the SEC eventually caught on to his scheme and charged him with insider trading, they found themselves in a legal and philosophical quandary: can’t someone trade—and profit—off of their own opinion? And, as Winans himself stated: “The only reason to invest in the market is because you think you know something others don’t.”

Both free speech lobbyists and the securities industry filed complaints against the charges of insider trading leveled at Winans. But the SEC wisely sidestepped the more philosophical dilemmas and focused instead on the concept of ownership. Their argument was that the information Winans and his co-conspirators were trading on was technically the property of his employer, the Wall Street Journal. The case went all the way to the Supreme Court, where Winans’s conviction was narrowly upheld.

The Winans case has led to a modern trend in insider trading theory: the concept of misappropriation. It’s a wider, more expansive view of the subject, wherein anyone who misappropriates information from their employer and then trades on that information is guilty of insider trading. This bolsters a key principle behind the criminalization of insider trading: while there may not be as many obvious victims as in other forms of financial crime, insider trading warps the landscape of financial markets and tilts the playing field in favor of those who are already well-positioned.

Raj Rajaratnam and the Galleon Group

Despite the puzzling corner cases, some insider trading is still remarkably clear cut. In 2011, Raj Rajaratnam used his multi-billion dollar hedge fund and personal network to get confidential information on mergers and acquisitions from his former classmates who had become senior executives at IBM, McKinsey, and Intel.

Rajaratnam then traded on that information—and made over $60 million doing so. The investigation into Rajaratnam was proportionally extravagant when considering the size of the crimes. It involved wiretaps and surveillance on a level usually reserved for cases of mob activity. The use of such high-powered tools and the record-breaking sentence Rajaratnam received (11 years) set a stark precedent—a warning for the rest of the financial sector.

Forensic investigators today don’t necessarily need wiretaps to detect insider trading anymore. Modern digital communication leaves its own receipts and recordings. And improvements in algorithms and AI are getting better at detecting social connections and relationships that can correlate to unusual trading patterns. But red flags aren’t enough to keep the playing field level: markets still need human referees who can interpret the nuances and confirm suspicious activities, and follow the money.

If you’re interested in joining the fight to keep things fair, check out some of the programs and experts below, and get started.

Three Standout Programs in Tackling Insider Trading

Utica College (BS in Fraud and Financial Crime)

Utica College’s online BS in fraud and financial crime teaches students how to detect, prevent, analyze, and investigate economic crimes. The curriculum takes a multidisciplinary approach that incorporates criminal justice, mathematics, economics, ethics, and sociology. Students may choose to add a concentration in financial investigation, which teaches students the forensic accounting skills necessary to pinpoint and document potential financial crimes.

Coursework includes topics such as accounting procedures; data analysis; methods of fraud detection and tracing illicit funds; damage assessment; and due diligence. This degree program was developed in coordination with the college’s Economic Crime and Cybersecurity Institute, a research and educational institution that’s been at the forefront of the study of financial crime for over 20 years.

  • Location: Utica, New York
  • Accreditation: MSCHE
  • Format: Online
  • Tuition: $400 per credit
  • Program Length: Four years


University of New Haven (MS in Financial Crimes Investigation)

The University of New Haven’s MS in financial crimes investigation covers a lot of ground: cybercrime, financial fraud, international crime, healthcare fraud, and organized crime. Students may choose to specialize their degree further by focusing on either the public sector or the private sector.

Required courses include investigations; regulation and occupational fraud; criminal procedure; white collar crime analytics; investigating financial crime; legal issues and investigative procedures in computer crime; and topics in investigations. For electives, students may choose from a broad catalog that includes subjects such as criminal justice, white collar crime, and digital forensics.

  • Location: New Haven, Connecticut
  • Accreditation: NEASC
  • Format: Online
  • Tuition: $915 per credit
  • Program Length: One to two years


LaSalle University (MS in Economic Crime Forensics)

The MS in economic crime forensics at LaSalle takes a 21st-century approach to financial crime prevention. The program prepares students to work in digital forensics, as external fraud auditors, and as data and network security managers. Students may choose to specialize in network security or corporate fraud.

As the product of collaboration between the school’s MBA program, the information technology leadership program, and the computer science graduate program, the MS in economic crime forensics has four core competencies: economic crime definition, analysis, and prevention; legal and corporate compliance and ethical issues; economic risk analysis and mitigation; and investigative practices, principles, and prosecution.

  • Location: Philadelphia, Pennsylvania
  • Accreditation: MSCHE
  • Format: Online
  • Tuition: $855 per credit
  • Program Length: One to two years

Three Insider Trading Experts Leading the Charge

Suzanne Lynch
Suzanne Lynch – Utica College

Suzanne Lynch is a professor of practice in economic crimes at Utica College, where she teaches in both the undergraduate and graduate economic crime programs. She received her bachelor’s degree in criminal justice from Wayne State University and her master’s degree in economic crime management from Utica College. She was named director of Utica’s Economic Crime Management program in 2010.

Lynch brings extensive private sector experience in the areas of risk analysis, fraud control, and financial investigations. She’s held senior positions in security and risk management at MasterCard, Goldman Sachs, and Comerica Bank. She has worked to improve the detection of suspicious transactions as well as to coordinate global investigations. She also has significant public sector experience, having conducted trainings with Europol, the Estonian Federal Police, the NYPD, the U.S. Secret Service, ICE, the CIA, and the Financial Services Authority in the UK.

Patrick Malloy, DBA
Patrick Malloy, DBA – University of New Haven

Dr. Patrick Malloy is the director of the MS in investigations program at the University of New Haven. Prior to joining the faculty at UNH, he acted as chair of accounting and fraud investigations at Pfeiffer University. He received his bachelor’s and master’s in accounting from Adelphi University and his DBA in accounting from Argosy University.

Dr. Malloy’s accounting practice has focused on fraud investigations and internal controls compliance. He brings this personal experience to bear in his academic role. His more current research revolves around cyber-enabled financial investigations. Together, these two spheres of experience help deliver Malloy’s students a modern vision of financial crime investigations. In 2012, Malloy won the Starnes Award for outstanding contributions as a teacher, mentor, and leader.

Michael Redmond, PhD
Michael Redmond, PhD – LaSalle University

Dr. Michael Redmond is an associate professor at LaSalle University, where he’s taught since 1999. As part of the master of science in economic crime forensics program, he teaches a wide range of courses, including subjects such as artificial intelligence, data mining, and data warehousing. He received his BS in computer science from Duke University and his MS and PhD in computer science from the Georgia Institute of Technology.

Dr. Redmond’s research into data-mining, case-based reasoning, and databases is exactly what 21st-century forensic investigators fighting economic crime need to understand and operationalize. This is evidenced in Dr. Redmond’s 2002 paper for the European Journal of Operational Research about a data-driven software tool for enabling cooperative information sharing between police departments.

Dr. Redmond is a member of the Association for the Advancement of Artificial Intelligence (AAAI) and the Association for Computing Machinery (ACM), including its special interest groups on artificial intelligence (SIGAI) and computer science education (SIGCSE).


Matt Zbrog

Matt Zbrog is a writer and freelancer who has been living abroad since 2016. His nonfiction has been published by Euromaidan Press, Cirrus Gallery, and Our Thursday. Both his writing and his experience abroad are shaped by seeking out alternative lifestyles and counterculture movements, especially in developing nations. You can follow his travels through Eastern Europe and Central Asia on Instagram at @weirdviewmirror. He’s recently finished his second novel, and is in no hurry to publish it.