If you and the buyer know about the risks then you’re not making a trade based on material non public information, are you?

If you make a hedging trade while having material knowledge that you withhold from the counterparty… well, that sounds like it could be edging towards fraud. Like taking out life insurance while hiding a medical condition.

But sure, it’s not against the law to do business with a sucker, so there’s degrees here.

John Tuld, in Margin Call:

Sam Rogers: And you're selling something that you know has no value.

John Tuld: We are selling to willing buyers at the current fair market price.