Insider Trading

Florida Man Accused of Insider Trading to Return Illegal Profits

Published on: March 11, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Securities and Exchange Commission announced this week that Jay Y. Fung, a Florida man accused of insider trading, has agreed to repay over $700K in illegal profits plus over $60K in interest that he made after he bought stock and call options in Pharmasset Inc. prior to its acquisition by Gilead Sciences. Fung made the trades after a friend tipped him about the pending deal.

In addition to buying shares of Pharmasset, he passed the insider tip onto his business partner who bought options, too. That individual has not been charged nor has he been accused of knowing that the information that Fung gave him was non-public and privileged.

Fung has since pled guilty in a parallel criminal case accusing him of conspiracy to commit conspiracy fraud. He could be facing up to five years in prison. His cooperation with authorities, however, will likely lessen his time under his plea deal.

Securities Fraud Headlines: Ne-Yo Sues Citibank, SEC Awards Whistleblower $700K, U.S. Supreme Court Takes on Insider Trading, and Morgan Stanley Must Deal with $500M CDO Case

Published on: January 19, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Performer Ne-Yo Files Countersuit Against Citibank Over Alleged $5.4M Securities Fraud
Singer Ne-Yo is suing Citibank (C), claiming that the financial institution should have had the proper safeguards and procedures in place that could have prevented his ex-money manager Kevin Foster from allegedly bilking him of $4.5M. The performer had filed a securities case against Foster and the latter’s employer, V. Brown & Co., in 2014.

Ne-Yo sought $8M. $4.5M of which Foster had purportedly swindled by moving funds out of the singer’s accounts to the money manager’s own accounts and the accounts of others. Ne-Yo sought $3.5M for service payments he says that he paid Foster and V. Brown between ’05 and ’13.

The performer claims that Foster forged his name on loan documents and took the money, including $1.4M from Citibank that the singer claims he never signed off on. Right before Ne-Yo sued his ex-manager, however, Citi filed its own lawsuit against him for the loan.

Now, Ne-Yo is saying that Citibank never told him of the numerous transactions made by Kevin, some of which involved his overdrawn account at the bank.

Sec Issues Over $700K Award to Whistleblower
The Securities and Exchange Commission is issuing an over $700K award to an individual who blew the whistle on a company. The information that the person provided led to a successful enforcement action. The whistleblower, an industry expert, was not employed at the company. This is the first time a company outsider has been issued this type of award since the SEC opened its whistleblower office in 2011.

Because the regulator protects the confidentiality of whistleblowers, the individual’s identity has not been revealed. SEC Enforcement Division Director Andrew Ceresney said that the agency values voluntary submissions by industry experts with ‘first-hand” information of wrongdoing committed by company insiders.”

Insider Trading News: SAC Capital Resolves Shareholder Lawsuit, Chinese Traders Settle SEC Charges, Another Court Turns Down Rajat Gupta’s Conviction Appeal SAC Capital Advisors Settles Insider Trading Case for $10M

Published on: December 30, 2015 | by Shepherd Smith Edwards & Kantas, LLP

SAC Capital Advisors Settles Insider Trading Case for $10M
SAC Capital Advisors has consented to pay $10M to resolve a securities case brought by shareholders of pharmaceutical company Wyeth. The plaintiffs contend that they sustained losses because the hedge fund had been insider trading in the drugmaker’s stock.

The class action securities lawsuit was brought following the arrest a few years back of Mathew Martoma, an ex-SAC Capital portfolio manager. After he was convicted last year of insider trading for using confidential outcomes of a clinical trial involving an Alzheimer’s drug, Martoma was sentenced to nine years behind bars in 2014. According to prosecutors, Martoma’s trades allowed the hedge fund to make $275M.

Other settlements have already been reached over this matter, including a $1.8B settlement with US authorities as well as a guilty plea by SAC Capital. An SAC Capital unit also settled insider trading claims involving Wyeth and Elan Corp. stock—Elan and Wyeth had been developing the Alzheimer’s drug together—for $602M.

SEC Announces Settlement with Two Chinese Traders Over Insider Trading Case
The U.S. Securities and Exchange Commission says that business associates and cousins Yannan Liu and Zhichen Zhou, who are traders in Hong Kong and China, respectively, have consented to pay over $920,000 to resolve insider trading charges. The two of them will disgorge their entire ill-gotten gains as well as pay penalties.

According to the regulator, Liu and Zhou traded Chindex International and MedAssets Inc. stocks because of nonpublic information they received about their upcoming acquisitions by private equity firms. Liu had been a private equity associate at a company that was connected to both deals.

SEC Cases: Ex-Stockbroker Accused of Bilking Investor for Home Renovations, Marwood Group Admits to Wrongdoing Over Compliance Failures, and Ex-Goldman Sachs Employee Faces Insider Trading Charges

Published on: November 28, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Former Stockbroker Raises Over $1.2M from Customers to Remodel His Home
The Securities and Exchange Commission is charging ex-stockbroker Bernard M. Parker with Securities Act of 1933 and Securities Exchange Act of 1934 violations, as well as violations of Rule 10b-5. The regulator says that Parker raised over $1.2M from long-term brokerage customers and others by getting them to think they were buying real estate tax client certificates and would make up to 9% yearly interest.

Instead, says the SEC, Parker only used a small part of that money to buy the liens. He used their other funds to remodel his house, pay his father-in-law’s bills, and make car payments. The agency also claims that the ex-broker conducted the unregistered and fraudulent investment offering using his Parker Financial Services from ’08 to ’14. He also purportedly failed to notify the investment advisory firm and broker-dealer where he was dually registered about his side business.

The Attorney’s Office for the Western District of Pennsylvania has filed criminal charges against Parker in a parallel case over the alleged broker fraud.

Political Intelligence Firm Admits to Compliance Failures
Marwood Group Research LLC has admitted to compliance failures and will settle the SEC’s case against it by paying a $375,000 penalty. According to the Commission, the firm did not properly notify compliance officers about the times that analysts received potential material nonpublic data from government employees.

The firm’s own written policies and procedures are supposed to play a key part in Marwood Group’s efforts to stop nonpublic and confidential data from reaching its clients so as not to influence their decisions regarding securities trading. Yet its misconduct happened in 2013 when analysts were looking for information about pending regulatory approvals and policies at the Food and Drug Administration and the Centers for Medicare & Medicaid Services.
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Insider Trading Cases: Judge Says SEC Can Charge Former Euro-Pacific Capital Brokers, Ex-Morgan Stanley Broker Pleads Guilty, Traders Who Used Hacked News Releases Settle for $30M, Father and Son Face Charges,

Published on: September 16, 2015 | by Shepherd Smith Edwards & Kantas, LLP

SEC Can Pursue Ex-Euro Pacific Capital Brokers For Insider Trading
In Manhattan, U.S. District Judge Jed Rakoff said that the SEC could pursue insider trading charges against two ex- Euro Pacific Capital Inc. stockbrokers despite a recent ruling issued by the 2nd U.S. Circuit Court of Appeals in another case.

Judge Rakoff turned down Benjamin Durant and Daryl Payton request to dismiss the SEC case accusing them of illegal trading prior to an IBP Corp. deal. The brokers had contended that the securities case should be dismissed because of the Second Circuit’s ruling that threw out the convictions of two hedge fund managers. The appeals court held that prosecutors have to prove a trader was aware that the source who provided a tip got a benefit beyond friendship for the exchange.

Payton, Durant, and others were criminally charged and pleaded guilty to insider trading. They had traded on SPSS stock based on a tip that IBM was going to acquire SPSS Inc. However, after the 2nd circuit ruling in the hedge fund case, a federal judge threw out the guilty pleas and prosecutors dismissed the criminal charges.

Still, the SEC continued with its criminal case against Payton and Durant. Now Rakoff is delaying the scheduled civil trial while the U.S. Supreme Court decides whether to deal with the appellate court’s ruling.

Former Morgan Stanley Broker Accused of Swallowing Tips Pleads Guilty
Vladimir Eydelman, an ex-Morgan Stanley (MS) broker, has pleaded guilty to tender-offer fraud, securities fraud, and conspiracy to commit both in an insider trading case. In federal court in New Jersey, the 43-year-old admitted to receiving insider corporate tips on pieces of paper and napkins, which he then chewed up and swallowed at Grand Central Station in New York.

The tips involved information filched from computers at a New York law firm. The insider trading scam, which lasted five years, resulted in $5.6 million in profits. Frank Tamayo, who provided Eydelman with the information, pleaded guilty to the charges against him last year. Eydelman used the information given to him to buy securities for himself, relatives, friends, Tamayo, and his brokerage clients before news of the deals went public.

Former Merrill Lynch Broker Must Pay $1.4M for Insider Trading

Published on: August 26, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Gary Yin, an ex-Bank of America Merrill Lynch (BAC) broker, must pay $1.4M in restitution for helping a client launder money made from insider trading. Yin admitted to helping former Qualcomm Inc. president Jing Wang conceal hundreds of thousands of dollars made in insider trading in that company and another company.

Yin set up brokerage accounts in the British Virgin Islands using a shell company to hide the scam and helped Wang transfer $525,000 to the shell account. He also transported documents to Wang’s brother in China to allegedly help hide the scheme from the FBI.

Now Yin must forfeit $27,000 in profits he made from trades in Qualcomm stock that were set up in a Merrill broker account in his mother-in-law’s name in the British Virgin Islands. He must also pay a $5,000 fine

Insider Trading Charges Filed Against 32 Defendants in Hacking Scam Involving Newswire Services

Published on: August 17, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has filed financial fraud charges against 32 defendants accused of insider trading by using information obtained from newswire services that were hacked. Two Ukrainians and 30 other defendants in the U.S. and abroad are accused of making $100 million in illegal gains.

According to the regulator, for about five years, Oleksandr Ieremenko and Ivan Turchynov, both from Ukraine, hacked in to at least two newswire services and stole hundreds of corporate earnings announcements before they were issued to the public. Bloomberg says the services are Business Wire, Marketwired, and PRNewswire Association LLC.

The suspected hackers are accused of grabbing over 150,000 news releases that allowed them to anticipate movements in the stock market and make trades that would turn a profit. They also purportedly set up a secret web-based location to transmit the stolen information to traders in numerous countries and U.S. states.

The two men are accused of concealing intrusions with proxy servers to hide their identities and pretending to be newswire service employees and customers. Turchynov and Ieremenko are also accused of using a video highlighting the theft of the earnings data prior to public release to recruit traders.

Dad of Ex-JPMorgan Banker Pleads Guilty to Insider Trading

Published on: August 12, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The father of a former JPMorgan (JPM) banker has pleaded guilty to taking part in an insider trading ring with his son. Robert Stewart will forfeit $150,000 and faces five years behind bars.

According to the U.S. Justice Department, Stewart’s son, Sean Stewart, allegedly gave his father tips about upcoming deals, including information about a number of acquisitions and mergers. The older Stewart divulged some of the tips to Richard Cunniffe, who has also pleaded guilty in the conspiracy. Cunniffe is now a cooperating witness.

The DOJ said that in early 2011, Sean, who was a JPMorgan Vice President in the Healthcare Investment Banking Group, began tipping his dad about numerous deals. The first one was about the acquisition of Kendle International Inc.—a deal that he worked on. Robert made nearly $8,000 by buying Kendle stock. The second deal involved the acquisition of Kinetic Concepts Inc. After Sean went to go work at Perella Weinberg, he allegedly continued to provide insider tips to his dad.

SEC Cases: Pennsylvania Lawyer is Charged with Insider Trading, San Diego Investment Adviser is Accused of Stealing Client Funds, and New York Man is Arrested for Fraud

Published on: August 2, 2015 | by Shepherd Smith Edwards & Kantas, LLP

SEC Accuses Pennsylvania Attorney of Insider Trading
The U.S. Securities and Exchange Commission is charging Herbert K. Sudfeld with insider trading ahead of the announcement that Nationwide Mutual Insurance Company and Harleysville were about to merge in a $760 million deal. The regulator contends that the Pennsylvania attorney illegally traded on the information, which caused Harleysville’s stock price to rise 87% when the announcement went public.

Sudfeld, who was a real estate partner at a law firm that gave Harleysville counsel on the merger, learned about the impending deal from a conversation involving a lawyer and the legal assistant they shared. That attorney was involved in the deal.

Sudfeld is accused of stealing the information and buying Harleysville stock. After the merger was announced, he purportedly sold the share he had bought, making about $79,000 in illegal profits. Prosecutors in Pennsylvania have filed a parallel criminal action against him.

San Diego Investment Adviser Accused of Stealing Client Money, Running Ponzi Scam
Paul Lee Moore and his now defunct investment advisory firm are charged with bilking client funds and operating a Ponzi scheme. According to the complaint filed by the SEC, Moore and Coast Capital Management raised $2.6 million from clients, and he allegedly siphoned almost $2 million for his personal spending.

The regulator said that Moore took the rest of the money and, in Ponzi scam-fashion, paid earlier clients with funds brought in by new clients. He is accused of sending out bogus account statements to clients, as well as sharing these statements with prospective clients. The California investment adviser purportedly lied about his educational background, employment history, as well as about how much Coast Capital managed in assets.
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U.S. DOJ Wants Supreme Court To Review Major Insider Trading Ruling that Reversed the Convictions of Hedge Fund Managers

Published on: July 31, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Justice Department wants the Supreme Court to review the ruling in United States v. Newman that overturned the convictions of hedge fund managers Todd Newman and Anthony Chiasson. The defendants were accused of trading on secondhand information they received regarding earnings announcements for Nvidia and Dell. The information was not public at the time.

The two men denied the charges, which accused them of involvement in a scheme that made over $70 million from illegally trading technical stock. Chiasson and Newman were convicted of fraud and conspiracy in 2012.

Last year, the United States Court of Appeals for the Second Circuit threw out the convictions. The court found that the government failed to prove that the tipper had benefited from the alleged scam.

Neither Chiasson nor Newman ever directly interacted with the employees that were the source of the purported tips, which were then passed on to others. The Second Court said that it reversed the convictions because the jurors who ruled on the case were not told that they had to find that the two men knew that the tippers had benefited in return for disclosing the confidential information.