The Justice Department’s crackdown on insider trading has taken a significant hit as Attorney General Todd Blanche shifts resources toward a newly established fraud enforcement initiative. This shift occurs amid a notable reduction in the number of attorneys dedicated to insider trading cases.

Once a robust team boasting over 40 lawyers, the department’s insider trading unit has dwindled to just about 10 attorneys. This significant downsizing comes as the White House prioritizes fraud cases related to public benefits, particularly in light of a scandal involving daycare fraud in Minnesota.

Bloomberg Law reported that this shift has led to a “decimation” of a unit previously recognized for its aggressive prosecution of high-profile cases against market manipulators linked to major financial institutions such as JPMorgan Chase and Deutsche Bank.

The pivot to focus on fraud related to public benefits was emphasized when Vice President JD Vance announced the establishment of the National Fraud Enforcement Division earlier this year. Observers have pointed out that this change in focus has largely come at the cost of the insider trading unit.

Former DOJ fraud supervisors have voiced concerns about the consequences of this shift. “The rise of the Trump administration’s DOJ fraud division has decimated a once elite white-collar unit known for convicting market-manipulating traders,” said Ben Penn, a senior reporter at Bloomberg Law.

Departures from the insider trading unit accelerated in recent weeks, particularly following the exit of the unit’s chief and her two deputies, all of whom transitioned to the new fraud division. Insiders report that many attorneys are more inclined to join this new division, which is perceived as having better stability and support from top officials.

It has been reported that ten trial attorneys from the insider trading unit were reassigned to focus on procurement fraud, with others choosing to leave for opportunities in private practice. Moreover, a middle manager was dismissed in September for resisting the pressure to drop securities fraud charges against prominent Indian billionaire Gautam Adani.

Sources within the department reveal that many attorneys are motivated to join the fraud division owing to its perceived stability and resources. “Why not go to where you’re going to be getting that support… rather than dealing with the constant threat of further cuts?” queried William Johnston, a former assistant chief in the unit.

Under the leadership of Colin McDonald, a close ally of Attorney General Blanche, the new fraud division was formed in response to the high-profile daycare fraud scandal in Minnesota. Critics within the department have raised red flags about the potential for political motivations to underpin this new focus.

Legal analyst Marcy Wheeler remarked that the fraud initiative is seemingly built on shaky foundations, likening it to chasing “peanuts” while more significant transgressions by high-profile individuals go unchecked. “It was the excuse to destroy white-collar policing,” she asserted.

The downsized insider trading unit is now left grappling with the challenges of conducting thorough investigations into sophisticated financial crimes such as spoofing—the practice of placing deceptive orders to manipulate market prices.

In a bid to retain personnel amid this upheaval, the Criminal Division has instituted retention bonuses, offering supervisors in the White Collar and Corporate Enforcement Section 20% of their salaries over six months, while trial attorneys would receive a 10% bonus.

“This is unheard of,” commented Sarah N. Lynch, a senior Justice Department reporter for CBS News. “Working in this unit was a very coveted and highly desirable role. The fact they need to pay retention bonuses is truly stunning.”

Despite the dramatic changes within the insider trading unit, a DOJ official maintained that the section “continues to be the place where attorneys tackle some of the most complex securities fraud cases.” However, a memo from the new fraud division hinted at plans to expand investigations into securities fraud as well.

The implications of these shifts could profoundly affect the government’s approach to white-collar crime, particularly in how it allocates resources and defines priorities. Legal experts are closely monitoring how this new focus will manifest in terms of both enforcement actions and broader regulatory implications.

As the fraud division gears up to tackle its ambitious agenda, the future of the DOJ’s traditional focus on insider trading remains uncertain. The ramifications of this strategic pivot may lead to increased scrutiny of how effectively the government can combat sophisticated financial crimes in the current political climate.