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New York’s Letitia James is easily the most aggressive state attorney general in the country when it comes to suing President Donald Trump.
She’s on the front lines of 15 legal actions brought by coalitions of Democratic AGs, all seeking to block executive orders and DOGE cuts, Her $454 million fraud verdict against Trump and his real estate company remains on appeal in Manhattan.
But James’ most daring excursion into Trumpworld may be one she has yet to formally announce.
It’s an ongoing inquiry into potential insider trading by the president’s inner circle, centered on last month’s markets-roiling tariff policies.
James’ so-called inquiry — the formal name for a kind of probe that falls short of a full-blown investigation — has rounded its second month, an AG spokesman confirmed to Business Insider, declining to divulge details beyond saying the office is “looking at” possible insider trading.
What would an inquiry involve? And, more importantly, what are its odds?
Business Insider asked a half-dozen legal experts, including three former high-level financial-fraud prosecutors from the New York AG’s office.
Opinions range wildly.
Some pointed to the perennial concerns over insider trading by members of Congress. They called James’ inquiry a proper, even necessary, exercise of the power vested in an attorney general whose Manhattan office sits three blocks north of the Stock Exchange.
Others called her inquiry a politically motivated boondoggle that’s doomed to fail. “This is a story of politics, not a story of law,” said Richard Epstein, a law professor at New York University.
But there was unanimity on two points. Proving insider trading is notoriously difficult. And whatever is happening behind the scenes is unprecedented.
“There’s been nothing like this,” said Manhattan attorney Armen Morian, a former financial crimes prosecutor for the New York AG’s office who helped defend Trump during James’ fraud case.
An 800-pound gorilla of a statute
The inquiry is empowered by New York’s Martin Act, a 104-year-old statute that gives state attorneys general extraordinary powers to police Wall Street.
Legal experts call the Martin Act the most powerful state securities-fraud law in the country. It allows the AG to issue subpoenas, grill suspects under oath, and file civil lawsuits or criminal charges.
In a 2018 essay, Epstein called the Martin Act “an 800-pound gorilla,” a term he said he still stands by.
It prosecutes securities and real estate frauds and is used only rarely for insider trading, which is the illegal profiting off of stock tips not available to the public.
Legal experts and three veterans of the AG’s office who have brought prosecutions under the Martin Act say they’ve never heard of it being used to investigate insider tips involving government policy, in this case, Trump’s on-and-off tariffs.
The novelty of James’ inquiry does not, in itself, doom her effort, said a former financial crimes prosecutor who asked not to be named, citing work constraints against speaking to the press.
“There is a body of Martin Act insider trading law — just not on these exact facts — that has been developed over decades,” the former prosecutor said. “And remember, the facts of every case are always novel.”
What is an AG inquiry, and how does it work?
An “inquiry” is what the New York AG’s office calls the earliest stage of a probe — before subpoenas go out, explained former Executive Attorney General Manisha M. Sheth. Now a partner at Quinn Emanuel Urquhart & Sullivan, Sheth oversaw the AG’s Division of Economic Justice.
Securities inquiries can be sparked by whistleblower tips or by allegations that surface publicly in the press or a lawsuit, she told BI.
They are handled by the state investor protection bureau, one of the six divisions Sheth once supervised, she said. There, prosecutors working with the AGs’ research analysts and data scientists would begin by reviewing raw trading data, she said. They’ll look for suspicious patterns.
Were there spikes in trading, for instance, on April 9, in the hours before Trump posted on Truth Social, “THIS IS A GREAT TIME TO BUY!!!” triggering a market upswing?
At some point, the bureau would send out a flutter of “inquiry letters,” authorized by the bureau’s chief or deputy chief and signed by the assistant attorney general handling the matter, Sheth said.
“Such letters can ask for documents, data, or information,” she said. “Sometimes the recipient of an inquiry letter may volunteer to meet with the office to provide the requested information.”
Cooperating at this early stage is completely voluntary. If a case advances to the point that subpoenas are issued, an inquiry will have graduated to an investigation, Sheth said.
“I do think it’s going to start with using trading data to show that no reasonable person would have engaged in these trades without that non-public information,” said Anthony Capozzolo, a former federal and state prosecutor.
“You’re going to want to, at the least, build an initial case that shows it’s very likely that the only motivating factor for these trades was this allegedly inside information.”
More roadblocks, these days, for gathering trading data
Compiling trading data will be tougher these days, predicted Capozzolo, a partner at Lewis Baach Kaufmann Middlemiss in Manhattan and a former federal and state-level prosecutor.
Pre-Trump, the AG would routinely and easily ask the Securities and Exchange Commission for trading data that’s not already publicly available.
“Now, the SEC is controlled by the Trump administration, and he could potentially instruct the SEC not to cooperate,” leading to a subpoena battle, Capozzolo predicted.
Identifying suspicious-seeming trading patterns is only the beginning, legal experts said.
Say, solely as a hypothetical, that a Trump insider reaped a small fortune by buying the dip in Apple stock right before Trump announced the tariff carve-out for electronics from China that sent the stock soaring.
That’s not enough to prove insider trading, legal experts said. For that, James would need witnesses willing to testify that specific investments were prompted by improper insider tips.
“They try to force people to tell them who was present in rooms,” Capozzolo said of prosecutors. “But the difficulty is a lot of these things may have happened in the presence of very upper-level Trump and MAGA acolytes.”
And anyone in Trump’s circle would certainly fight an inquiry letter or subpoena — and do so loudly.
“You’ll see an immediate challenge,” said Morian, who helped prosecute AIG CEO Hank Greenberg in the longest Martin Act case in the AG’s history.
“It’ll be lock and load. The minute any subpoena goes out, I would immediately intervene if I were in the Justice Department, and say ‘Nope. Can’t do it. Sorry.'”
Suing, charging, or subpoenaing Trump is a non-starter, given executive privilege and presidential immunity, which bars prosecution for official acts, Morian said. (He predicts presidential immunity would extend to civil cases as well someday, “If that ever gets to the Supreme Court.”)
State AG subpoenas issued to members of the executive branch — cabinet members and the like — could also be challenged on executive privilege grounds. And investigating the stock trades of members of Congress would result in challenges as well, Morian predicted.
“If you overreach too far, you could easily see a private litigant taking this up to the Supreme Court, and the Supreme Court limiting the jurisdiction of state attorneys general in ways we’ve never seen before,” he said.
James is being probed by the DOJ for alleged mortgage fraud, an allegation she has called baseless and which her attorney, Abbe Lowell, has called “improper political retribution,” according to CBS.
Should her insider-trading inquiry advance, James, a Democrat who campaigned for AG on a promise of investigating Trump, would herself would face accusations of political retribution and bias.
Over the years, Trump has decried James’ investigations into his finances and business as baseless, “racist,” and part of a “political witch hunt.” A Trump spokesperson did not immediately respond to a request for comment on James’ tariff-trade inquiry on Friday.
Then there is the inherent difficulty of proving insider trading — of teasing out any illegality from the chaos of sudden, trillion-dollar market swings.
“There’s a huge amount of market turmoil whenever there’s a major tariff initiative,” said Epstein.
How can anyone call it insider trading if thousands of investors are making similar trades for benign reasons, based on hunches, past experience, or dumb luck, he asked.
“When the markets are this volatile, people make and lose money second to second, for any number of reasons,” agreed Morian.
“There are so many contingent variables,” he added. “How do you discern the signal from the noise, to prove your case?”
