SEC Defeats Summary Judgment Bid In 'Shadow Insider Trading' Case

On November 20, 2023, a federal district court denied summary judgment for the defendant in SEC v. Panuwat, a litigated enforcement action brought by the Securities and Exchange Commission (SEC) relating to so-called "shadow trading." Shadow trading involves an investor possessing material non-public information (MNPI) about "Company A" but trading in the securities of "Company B," another company with which Company A shares some form of close connection in the market. In this case, defendant Matthew Panuwat, in the course of his employment at a company called Medivation, allegedly learned that his company would be acquired, and seven minutes later began buying out-of-the-money, short-term call options in another company, Incyte. The SEC has alleged that Incyte was a closely comparable company to Medivation.