A Western Australian man on Friday faced charges of insider trading of ASX shares that could send him to 10 years' imprisonment and owe a $495,000 fine.
The 50-year-old man's case was heard in Perth Magistrate's Court, involving his trading of stocks in Lonrho Mining Limited, which is now called Lucapa Diamond Co Ltd (ASX: LOM).
He was arrested after a collaborative investigation between Australian Federal Police, Australian Securities and Investments Commission, Australian Taxation Office and the Australian Criminal Intelligence Commission.
The authorities claim the man became aware in 2012 that Lucapa had discovered a very large diamond in Africa – news that was not yet public.
Using this private knowledge, it's alleged the man bought up shares in the small-cap exploration company on behalf of a family member.
He is also accused of passing the tip onto a client, who did not act on the advice.
Trading shares with inside knowledge is a serious offence
This all allegedly happened the day before Lucapa shares were placed in a trading halt – and 5 days before the discovery was publicly announced.
The Lucapa share price understandably jumped once the market knew of the news. The shares that the man bought increased by $6,000 in value.
The man faced two charges in court – one of insider trading and another of communicating inside information to a person that could lead to insider trading.
The Motley Fool has contacted Lucapa for comment.
Lucapa shares were up 1.61% on Friday to trade at 6.3 cents at market close.
ASIC this year revealed its intention to scrutinise insider trading offences more closely, offering immunity to those who came forward with information that triggers a new investigation.
