system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5:What is wrong with insider trading and how could the government proved you were involved?

Part 1: I just can't figure out why someone should go to prison for making an otherwise legal transaction just because they know something. If I think a stock's price will rise I will buy it and if I think it will fall I will sell, if I have any information about a stock I will factor that into my decision. How can this be illegal, and at what point is the line crossed?

Hypothetical situation for part 2: Lets say I own a large amount of shares in a big corporation (I.E. Nike or Coca Cola). One day I decide to sell all my shares, only because they are worth a more than I paid for them and if I sell now I can retire with enough wealth for my whole family to live in luxury. I sell and life is great. The next week the stock crashes and is totally worthless and the SEC decides to investigate me for insider trading even though I had no knowledge of the impending crash. How could I prove my innocence and how would they prove me "guilty"?
gpt
Insider trading is when you have information that the general public don't have. It might be because you are an employee of the company, or because you are a major customer of the company who is about to sign (or cancel) a contract.

It can be proved by things like e-mail records. If a big contract is about to be signed, there are usually months of negotiations before the information is made public. There will be records kept (by the company and by their customer) of meetings that have been held, who attended them, what the outcome of the meetings was, etc. Often a contract will be signed before the information is made public. It would be very easy to prove whether someone knew about the kind of thing that would make any significant difference to a share price.

In your scenario, whatever caused the crash, there would presumably be no record of you having attended meetings about it, seen e-mails about it, met people who would have known about it, etc. So you're pretty safe. And of course (depending which country you're in) you are innocent until proven guilty, so the lack of evidence is in your favour.