The possibility that New York’s attorney general, Letitia James, could be preparing to launch an insider trading inquiry into President Trump’s inner circle puts into  sharp relief the escalating conflict between Ms. James and the 47th president.

Ms. James, her office tells Business Insider, is now in the second month of an “inquiry” — that’s a step short of a formal investigation — into whether members of Mr. Trump’s camarilla illegally benefited from the market turmoil engendered by the administration’s tariff policy. The attorney general is now “looking into” the matter.

The attorney general, who won a half-billion-dollar fraud judgement against the Trump Organization that is under appeal, has something of a trump card to play in respect of building a new case for insider trading. In 1921 the New York legislature passed the Martin Act, which grants the state’s attorney general expansive power to investigate securities fraud and bring civil or criminal prosecutions. Used infrequently for eight decades, it became a favorite tool of Eliot Spitzer while he served as attorney general.  

A legal sage, Richard Epstein, calls the Martin Act an “800-pound gorilla” because of how favorable it is to prosecutors — it eliminates the “elements of knowledge, reliance, and damage” usually required. The Journal’s editorial board has labeled it “the worst law in America” because it “lets prosecutors call almost anything fraud, and there’s no requirement to prove evil intent in civil cases.”

An “inquiry” covers an investigation before subpoenas are issued, and it could involve voluntary requests for nonpublic information from, say, the Securities and Exchange Commission. That would likely run into a stone wall in the person of the chairman of that body, Paul Atkins, who was appointed by the 47th president. Subpoenas would signify a more serious stage. 

Ms. James could focus on a declaration that Mr. Trump posted on Truth Social on April 9, the day that he scaled back tariffs to 10 percent on all countries except China. Mr. Trump declared: “COOL! Everything is going to work out well. The USA will be bigger and better than ever before!” and “THIS IS A GREAT TIME TO BUY!!! DJT.” Stocks soared. 

Two Democratic lawmakers — Senator Schiff and Congressman Mike Levin — have called, in a letter to the White House chief of staff, Susie Wiles, for a full disclosure of financial transactions from all White House senior employees leading up to the pivot in tariff policy. A spokesman for the White House, Kush Desai, responded that “if Adam Schiff is concerned about insider trading, he should start by probing his fellow California Democrat Nancy Pelosi.”

Mr. Schiff, one of Mr. Trump’s foremost antagonists in Congress, and Mr. Levin, though, maintain that “newly identified data” raise “concerns about potential violations of federal ethics and insider trading laws by individuals close to the President with access to non-public information.”

Senator Murphy, another critic of the president, wrote on X that an “insider trading scandal is brewing … Trump’s 9:30am tweet makes it clear he was eager for his people to make money off the private info only he knew. So who knew ahead of time and how much money did they make?” How Mr. Murphy’s argument about “private info” squares with how Mr. Trump was declaring his thoughts on social media is likely to be a flashpoint if the investigations continue.  

Another devoted foe of Mr. Trump, Senator Warren, went on CNN’s “State of the Union” last month to tell Jake Tapper: “It’s entirely appropriate to have an investigation to make sure that Donald Trump, Donald Trump’s family, Donald Trump’s inner circle, didn’t get advance information and trade on that information.”

Ms. James could be asking those same questions — but, courtesy of the Martin Act, without the same burden of proof in respect of intent to defraud. Another advantage is that the provisions of the Martin Act are not subject to judicial review. A conviction for insider trading under the Martin Law can carry a punishment of up to four years in prison. A civil judgement can carry a fine of up to $3,000 for each infraction.  

At the same time that Ms. James, who promised while campaigning for her office to hold the president to account,  pursues her latest legal gambit, Mr. Trump is striking back. Ms. James is herself the subject of a criminal referral to Attorney General Bondi from the director of the Federal Housing Finance Agency, Bill Pulte, the Pulte Homes heir. 

The referral alleges multiple instances of mortgage fraud. Her attorney, Abbe Lowell, calls the accusations features of a “revenge tour” and the products of “cherry-picked” evidence. Mr. Lowell, who also represented Hunter Biden across his two criminal cases, reckons that Mr. Pulte’s case against Ms. James amounts to “three pages of stale, threadbare allegations with no reason to proceed.”

The decision to bring charges belongs to Ms. Bondi, who serves at the pleasure of Mr. Trump. The case of the Baltimore City state’s attorney, Marily Mosby, could be instructive. Ms. Mosby was in February 2024 convicted by the Department of Justice of making a false mortgage application relating to the purchase of a home in Florida. She was sentenced to 12 months of home detention, three years of supervised release, and 100 hours of community service.       

The accusations against Ms. James, which echo those against Ms. Mosby, come after the New Yorker secured a civil fraud verdict against Mr. Trump for north of $500 million for exaggerating the value of his real estate properties. Judge Arthur Engoron also embedded an independent monitor in the Trump Organization and banned Mr. Trump’s two eldest sons from doing business in New York.

An appellate court, though, evinced skepticism toward the ruling, raising the possibility that it could be reversed on appeal.  The tribunal heard the appeal in September, and — remarkably — has still not ruled.