A Texas man netted $1.7M from insider trading after overhearing his wife’s secret work calls — now it may cost him $250K, 5 years in jail. But aren't US politicians playing the same game?

‘Severely reckless’ stock trading

Loudon gathered the confidential tidbits in question while working from home alongside his wife.

According to the Times, which cited a complaint filed in the Southern District of Texas by the U.S. Securities and Exchange Commission, Loudon’s wife first started working on BP’s proposed acquisition of TravelCenters of America in early 2022.

He began buying stock in the company on Dec. 27, 2022 and, per the SEC’s complaint, he then “methodically” sold around $2.16 million in positions from his individual brokerage account and his Roth IRA over the next seven weeks to buy more TravelCenters of America stock.

Federal prosecutors said Loudon was “severely reckless” in acting on the confidential information he overheard and that he kept his trades secret from his wife. When he faced his reckoning, she was not named in the court documents.

When BP’s acquisition of TravelCenters of America was made public on Feb. 16, 2023, the latter’s stock price soared by 70.8% and Loudon immediately sold all of his stock for $1,763,522 million in profit, according to the Times report.

But when he realized his lucrative trades would face scrutiny from BP’s lawyers, he told his wife, who was “stunned” by his admission and reported his actions to her supervisor. Her position with BP was terminated, despite the company finding no evidence that she knowingly leaked information or was aware of her husband’s trading. She filed for divorce in June 2023.

As part of his guilty plea, Loudon has agreed to forfeit the $1.7 million in illegal proceeds. He also faces up to five years in federal prison and a possible $250,000 maximum fine. His sentencing is scheduled for May 17.

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Insider trading in Congress

Insider trading has captured the attention of the U.S. public after a string of reports about suspiciously well-timed trades raking in the big bucks for lawmakers in Congress. But unlike Loudon, who faces time behind bars for securities fraud, these politicians are free to trade.

Former house speaker Nancy Pelosi (D-CA) has been labeled as a figurehead of suspect trading in Washington. Together with her venture capitalist husband Paul, Pelosi has netted millions of dollars in profit from buying call options on blue-chip stocks like Salesforce (CRM), Google (GOOGL), Roblox (RBLX), and Disney (DIS).

But it was their recent Nvidia (NVDA) trade that has really set tongues wagging. Late last year, the Pelosis bought $2 million dollars worth of Nvidia call options — a trade that, by Feb. 22, had already made them a whopping $1.8 million, or 10 times Nancy’s annual salary, according to the Nancy Pelosi Stock Tracker account on X, which is run by the investing app AutoPilot.

The success of this trade has triggered the usual accusations of “insider trading” against Pelosi because she, like other lawmakers, has information and influence over pending legislation and how it might impact different industries.

Pelosi isn’t alone in facing intense scrutiny of her stock trading. Of the 100 trading members of Congress in 2023, 33% beat the S&P 500 with their portfolios, according to Unusual Whales — with four politicians (Brian Higgins D-NY, Mark Green R-TN, Garret Graves R-LA and David Rouzer R-NC) achieving over 100% gains. That is dramatic in comparison to the S&P 500’s 24.8% gain.

In recent years, there has been a growing movement in Washington to ban members of Congress from trading stocks and to stifle any possible corruption and conflicts of interest among lawmakers.