Trading on non-public information is a severe violation that may have substantial repercussions both legally and monetarily. The recent case between Yuji Naka, co-creator of Sonic, and a former employee of Square Enix has brought to light the dangers that are connected with purchasing and selling stocks based on knowledge that is not available to the general public.
The two persons were brought before a judge for purchasing and selling shares in Square Enix mobile games, Dragon Quest Tact and Final Fantasy VII: The First Soldier, before the games had been formally announced by the company. They started off with a total investment of 130,000 shares, which they later turned around and sold for a profit of over 20 million yen.
Naka pleads guilty
In court, Naka admitted his guilt by saying, “There is no question in anyone’s mind that I was the first person to learn about the games and that I purchased shares in them before they were made public.” Naka also admitted that he was the first person to learn about the games before they were made public. The trial came to a conclusion with a guilty conviction for both of the defendants, shedding light on the legal repercussions of engaging in insider trading.
Trading on inside information is against the law because it offers certain investors an unfair advantage over other investors, which in turn undermines trust in the market and reduces its overall efficiency. Insider trading is punishable in Japan by fines that may reach up to three times the amount of unlawful gains, imprisonment, and/or the suspension of trading licenses, depending on the severity of the crime committed. The public’s understanding of insider trading and the influence it has on the video game industry has increased as a result of the Square Enix case.
There has been a lack of consistency in the regulatory reaction to insider trading in the video game business. Several businesses have taken steps to combat the practice of insider trading by instituting rules and processes that are crystal clear with respect to the management of sensitive information, providing staff with training, and monitoring trading activity for suspicious conduct. On the other hand, certain parties have been hesitant to respond, which has contributed to a lack of public trust in the sector.
