In a forthcoming article, we examine the inequities and disparities in federal sentencing for insider trading convictions. The article examines the causes, symptoms and reach of this phenomenon and recommends corrective measures, including a deemphasis of financial harm-based sentencing enhancements to prioritize a more accurate measure of culpability: fiduciary breach.
Sentencing disparities prevail in the insider trading criminal context. On average, corporate directors and officers convicted of insider trading are treated significantly more leniently than rank-and-file employees as well as other offenders convicted of the same offense. These disparities exist even though high-level executives monetarily profit significantly more, on average, than their lower-level insider counterparts. This phenomenon directly contravenes the federal Sentencing Guidelines. Faithful implementation of these guidelines would result in substantially more severe sentences for such high-level offenders.
The United States enforces its insider trading laws significantly more aggressively and with greater success than other developed countries. The Securities and Exchange Commission (SEC) files civil actions against alleged insider traders while the Department of Justice (DOJ) criminally prosecutes these alleged violators. Our article focuses on criminal enforcement and sentences.
In determining an appropriate criminal sentence, courts look to the U.S. Sentencing Guidelines which are advisory since the Supreme Court’s decision in United States v. Booker (543 U.S. 220 (2005)). The guidelines operate under a point calculation system, which first assigns a numerical grade—a “base offense level”—to criminal acts. After the base level is calculated, a federal district judge must calculate an adjusted offense level based on the nature of the convict’s actions at-issue and prior criminal record to determine the sentence for an individual or corporate defendant. The adjusted offense level corresponds to the guidelines sentencing table, which recommends sentencing ranges based on the point-calculated offense level. The judge also considers several individualized factors as part of sentencing pursuant to 18 U.S.C. § 3553(a), and the government has discretion to make a § 5K1.1 motion, whereby the prosecution seeks a sentence below the guidelines in return for “substantial assistance” in prosecuting co-conspirators.
Insider trading sentences, which are governed by § 2B1.4 of the guidelines, are calculated using an organized, systematic dollar-value table to measure “gain resulting from the offense” as the primary determinant in calculating offense level enhancements. Though several circuit courts have disagreed over precisely how this “gain” should be calculated, it nevertheless remains the predominant guidelines factor in calculating insider-trading sentences.
Application of these factors—along with routine and significant judicial deviation from the guidelines—has caused considerable, recurrent, and egregious disparities in recent sentences. For example, Gene Levoff, a former high-level in-house counsel for Apple who oversaw the company’s insider trading compliance, received no prison time despite years of abusing his fiduciary duties to the tune of $600,000 in illicit gains. Instead, he received only a $30,000 fine (despite his $13 million net worth) and 2,000 hours of community service. In another case, Marc Demane Debih spent years running two separate insider trading schemes, which each implicated major investment banking firms, to grow his $70 million net worth. He received time served after living under house arrest at a hotel-apartment for less than a year. Joe Lewis, a British billionaire who received tens of millions of dollars from his insider trading, received no prison time and avoided personal fines completely.
These cases are in marked contrast to cases where rank-and-file employees were sentenced to lengthy prison terms. Anthony “Rigatoni” Viggiano, a junior investment banking associate, received $35,000 in kickbacks from an insider trading scheme and was sentenced to 28 months in prison. In another case, Dayakar Mallu, a lower-level I.T. employee, was sentenced to 24 months for trades he executed on behalf of the company’s chief information officer—who received no prison time and remains a CIO today. Another individual, Seth Markin, was sentenced to 15 months after $82,000-worth of gains. His co-conspirator, who tipped more people and gained $1.3 million from the scheme, was sentenced to five months.
The evidence from these disparities is both anecdotal and empirical, with higher-level insiders receiving fewer months imprisonment on average than their lower-level counterparts, despite higher-level insiders reaping significantly more on average in illicit profits.
Our article is the first to examine recent sentencing disparities unique to insider-trading cases. It ascertains the depth and breadth of the disparities by reviewing the legally salient facts and circumstances of dozens of high-profile and undeservedly low-profile insider-trading cases and questions the propriety of the resulting prison sentences. Additionally, we aggregate sentencing data from nearly 100 recent criminal cases from the previous five years to assess patterns and inequities across insider trading sentences.
Our analysis shows that the application of the Sentencing Guidelines, when combined with routine departure from these guidelines by federal judges, has culminated in an inequitable sentencing regime. To ameliorate this situation, we reason that fiduciary breach should be a priority because it is a significantly more accurate measure of culpability than the financial amount illegally gained or avoided by the offender.
Marc I. Steinberg is the Radford Professor of Law at the SMU Dedman School of Law and honorary visiting professor at King’s College London Dickson Poon School of Law. Christian Z. MacDonald is a 2026 graduate of SMU Dedman School of Law. This post is based on their article, “Inequitable Sentencing Disparities in Insider Trading,” forthcoming in The Review of Litigation at the University of Texas School of Law and available here.