Of course he is allowed to sell the stocks if he wants to. But if he knew more than the other shareholders and sold because he knew the stock would plummet, it's neither lawful nor "right".
According to the article, he knew he was not allowed to sell his stake. Maybe he was upset and was not thinking straight, but if the events happened as depicted in the article, there is no other way to describe this than "wrong".
I have trouble seeing how insider trading is "wrong", myself. Somebody bought or sold stock who was going to buy/sell at that time anyway. How did the actions of the inside trader hurt them?
Life is full of insider advantages. People profit from personal connections and information all over the place. Why should we pretend the stock market is any different? Especially considering how flimsy the charade really is. "Insider trading" is truly rampant and enforcement is an arbitrary joke.
To me this is exactly the kind of thinking that lead to the financial crisis. People selling shonky investments to people who trusted in them and justifying it the same way that you are.
I believe that the fairer and more transparent systems are the most efficient. The 'no rules' system you describe would quickly degenerate into a scamfest with far less participants and far less liquidity. Better to actually enforce the rules that exist to reduce the 'rampancy' of insider trading in my opinion.
Oh and I don't think I'll be investing in your startup.
You can't think of it like that, in the context of a single transaction. If an insider has the right to trade on their insider knowledge, they have an incentive to turn around and use their insider influence to create opportunities to benefit from that right.
What's almost as bad is how ambiguous the rules are. At one point in my life I studied for the CFA, and the Ethics section (which included Insider Trading among other things) was one of the hardest sections because everything was so cryptic and muddy.
According to the article, he knew he was not allowed to sell his stake. Maybe he was upset and was not thinking straight, but if the events happened as depicted in the article, there is no other way to describe this than "wrong".