Did Trump enable insider trading?

0:01NPR

0:11It's been a rollercoaster of a month on the stock market. At the start of April, President Trump made his big announcement that he had slapped huge new tariffs on most of the world. That sent markets into freefall. It was the steepest drop in share prices since the early days of the pandemic. And then a week later, Trump announced that he would pause a lot of those tariffs for 90 days. I thought that people were jumping a little bit out of line. They were getting yippy, you know, they were getting a little bit yippy, a little bit afraid. And thus, the pause. After this announcement, the stock market had a great day.

0:51A whatever the opposite of yippee is. One of the highest percentage rises in one day, in fact. From yippee to yippee! Now, that morning, Trump had posted on his social media company, Truth Social. He'd said that now was a great time to buy. And if he'd followed that advice, you could have made a lot of money. And this got many Democratic politicians asking authorities to investigate possible insider trading. Senator Elizabeth Warren spoke to CNN about this on Sunday. And it's entirely appropriate to have an investigation to make sure that Donald Trump, Donald Trump's family, Donald Trump's inner circle, didn't get advanced information and trade on that information.

1:34And you know, it's not just politicians wondering about this. Last week, Google searches for the term insider trading spiked. This is The Indicator for Planet Money. I'm Adrian Ma. And I'm Darian Woods. Today on the show, were Trump's posts insider trading? If a politician were to know ahead of time about a big policy shift, can they just tweet it out? We will learn the outs and ends of insider trading from a former Wall Street lawyer.

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2:44Matt Levine is a Bloomberg opinion columnist who's worked on Wall Street both as a lawyer and a Goldman Sachs investment banker. Matt describes what happened at 9.33 a.m. Eastern Time on the morning of Wednesday, the 9th of April. Donald Trump. truthed. That's the verb we're using, truthed. That's, I think, the verb that Truth Social and Donald Trump officially use. No comment on the actual veracity of the content, but he truthed. He truthed, be cool. Everything is going to work out well. The USA will be bigger and better than ever before. And then he added a few minutes later in another Truth Social post, this is a great time to buy.

3:23I'm trying to say it in all caps. Again, with more passion, Matt. Right. This is a great time to buy. And at least for the stock market that day, that was the truth. At 1.18pm, President Trump posted on Truth Social again. This one was more official sounding. Trump said that he was putting on a 90 day pause for most of the recently announced tariffs for many countries. Markets like the S &P 500 shot up like a firecracker. The S &P was up 9.5 % that day. It was one of the best days in recent memory. And had you bought at 9.37 when he said it was a great time to buy, you did really well. Was this insider trading?

4:05First off, let's define what the term means. Insider trading is trading on the basis of material non-public information that you got in a bad way. Trading on the basis of material non-public information that you got in a bad way. All right, let's break down Matt's definition bit by bit. So first, material information. Material information means that it matters to the stock price. Then there's non-public. So that means not behind closed doors. And finally, that it's information that you got in what Matt calls a bad way. There is that element, right? If you investigate a company and you're the first one to learn that its products are defective, You can go trade on that because you've found information that's valuable.

4:56If you're the CEO and you know you're doing a merger and you just want to buy some stock for yourself to make a quick buck on the merger, you're violating a duty to the company. And that's something that regulators don't want. So the insider trading rule is basically if you're working hard to find out new information, you should trade on your new information. If you're cheating and stealing the information, you can't. Take Alaska Airlines. Last year, a door fell off one of its planes mid-flight. Now, the plane landed safely. There were only a few minor injuries. But there was some chatter online about whether someone could theoretically make money off this.

5:33Someone at some point posted on Reddit, like, if I were on that plane and I knew this is going to be bad for, you know, the manufacturer of the plane, can I go short their stock while I'm on the plane? And that's like the classic case of you have information that the general public doesn't know, but you didn't do anything wrong to find it out. And I think it's fairly clear you would be allowed to short stock in that situation. You'd have to have a lot of presence of mind, but you could do it. So that's our rubric. Material non-public information gained in a bad way. Let's apply this to Donald Trump's truth posts last week before that particular tariff pause.

6:09If a politician posts on social media hinting about a major policy change they're involved with, is this insider trading? I never want to give legal advice. To me, it feels like the opposite of insider trading. Insider trading is when you know something and you tell your buddy and you say to your buddy, hey, you should trade on this. If you're announcing it publicly, how can it be insider trading? Okay, so that part about non-public information wasn't met. but Matt doubts whether Trump even had material information early in the morning when he posted to buy. At 9.37 he did not announce publicly that he was pausing tariffs and I think that a better reading of the record is that at 9.37 he was still defending the tariffs and that in fact the policy change came later that like between the truth social saying this is time to buy and the truth social saying we're pausing tariffs he changed his mind about pausing tariffs I'm not sure of that.

7:06That's like what the reporting suggests, but I don't have a window into his mind. So I don't think that at 937, he was hinting that he was going to pause tariffs. And yeah, we don't know for sure what was going on in Trump's head. Now, I should say that like, there's like, there's like noise from inside the Trump administration that like, this was the plan all along, that this is a cunning plan to, you know, get people to negotiate. And so if you believe that, then, then, then who knows, right? Maybe, maybe there was a warning. But my impression is that the facts actually changed between the truth social posts.

7:37It'd be very interesting if he was hinting that he was going to pause tariffs. It'd be very funny, but I'm not sure it'd be insider trading because he was posting it publicly. You could argue that there's a gray zone here. Is a social media account more like a smoke-filled room or an open town square? Actually, the Securities and Exchange Commission has made rules about companies disclosing information on social media. And the basic rule is you can do it. You have to give people some heads up that the CEO will be posting material news on Twitter or whatever. Similarly here, I do think there's not an SEC filing, but everyone is on notice that Donald Trump does his public communications on Truth Social.

8:15There were some trades that were done minutes before Donald Trump's afternoon announcement on pausing the tariffs. There is no evidence whether or not these were from a White House insider or alternatively from something benign, like the news of the successful Treasury bond auction that had just finished. This doesn't change the fact that truthing or posting on social media isn't generally considered insider trading. The White House denies any wrongdoing and says that morning's posts were just the president reassuring the markets. Overall, though, Matt is sympathetic with the whole saga rankling people.

8:51I understand why people are annoyed by it, right? It does seem like it would be winking at a change in policy before making the change in policy official in a way that might seem to advantage some people over other people. But that doesn't strike me as insider trading. It just strikes me as sort of not ideal governance, right, which is not exactly a securities fraud issue. More Democratic politicians are joining the call for investigations. On Friday, Senate Minority Leader Chuck Schumer wrote to state attorneys general to investigate whether Trump or any of his associates broke state laws to profit from the tariff change.

9:35This episode was produced by Cooper Katz McKim with engineering by Cole Takasugi Turnovan. It was fact-checked by Sarah Juarez and edited by Julia Ritchie. Kate Kincannon is the show's editor and The Indicator is a production of NPR.