The U.K. Supreme Court ruled that a trader, who was accused of insider trading in the U.S., can’t be extradited to face those charges, since the alleged misconduct occurred outside the U.S.
In 2019, a grand jury in New York returned an indictment against a London resident, Joseph El-Khouri, charging him with 17 counts of securities fraud and wire fraud in connection with an alleged scheme to exploit inside information about pending merger deals involving U.S.-based companies.
According to the court, El-Khouri was accused of using contracts for difference (CFDs) to trade on inside information — allegedly obtained from friends in the U.K. that worked as investment bankers — allegedly generating almost US$2 million in illicit profits.
At the time, the U.K.’s Financial Conduct Authority (FCA) also investigated the case, but concluded that there was insufficient evidence to prosecute El-Khouri in the U.K., the court noted.
However, U.S. authorities sought El-Khouri’s extradition to face charges in New York. And, following a hearing, a U.K. district court judge ordered his extradition — a decision that was upheld on appeal by both the U.K.’s secretary of state, and the U.K. High Court.
Now however, the U.K. Supreme Court has unanimously overturned those decisions, upholding El-Khouri’s argument that the test for extradition was not met.
Specifically, he argued that the case failed to satisfy the requirement of “double criminality” — which requires that the alleged conduct constitutes a crime in both the U.K. and the U.S.
In this case, the court concluded that the alleged conduct failed to satisfy that test since all of the allegedly illegal activity took place outside of the U.S. The CFDs were traded through a U.K. broker, and while their value was tied to the stock price of U.S. companies, the instruments themselves were listed in the U.K.
If the circumstances were reversed, and a U.S.-based trader used U.S. securities to trade on inside information about U.K. stocks, this wouldn’t amount to insider trading in the U.K., the court said, as “the offence of insider dealing” in the U.K. “is confined to circumstances where the dealing, the regulated market on which the dealing occurs or the intermediary were within the U.K.”
As a result, the Supreme Court unanimously allowed the appeal, ordered that El-Khouri be discharged, and quashed the order for his extradition.