Articles Posted in Insider Trading

The US Securities and Exchange Commission has brought insider trading charges against seven people who made millions of dollars while insider trading on dozens of upcoming acquisitions and mergers involving 30 corporate deals. The regulator’s complaint contends that Daniel Rivas, who used to be a bank IT employee, misused the access he had to a computer system by tipping four people with information that they then used to trade. Some of the those whom Rivas tipped allegedly also tipped other people, who tipped others, too.

InvestmentNews identified the bank that Rivas worked for at the time of the misconduct as Bank of America (BAC). (Bank of America Merrill Lynch later fired Rivas, who was then hired by RBC Capital Markets. In the wake of the insider trading allegations against him, Rivas was suspended by RBC.)

Rivas often tipped James Moodhe, who is the father of his girlfriend, using handwritten notes. Moodhe made approximately $2M from trading on the tips and shared the information with financial adviser Michael Siva, whom InvestmentNews identifies as a former Morgan Stanley (MS) broker.

Citigroup to Pay Plaintiffs Suing Over Libor Rigging

Citigroup Inc. (C) will resolve a private US antitrust lawsuit alleging Libor manipulation by paying plaintiffs $130M. The litigation was brought by “over-the-counter” investors who engaged in direct transactions with banks that belonged to the panel that determines London Interbank Offered Rate.

As part of the proposed preliminary settlement, the bank will pay the money to a fund for future class members. It also will cooperate with the lawsuits brought against other banks also accused of involvement in Libor rigging. Despite settling the case, however, Citigroup is not admitting or denying any wrongdoing.

Lawyer Barred Over Fraud Allegations
The US Securities and Exchange Commission has barred David Lubin, a New York-based lawyer, from practicing or appearing before the regulator and acting as any company’s director or officer. The regulator is accusing him of making misleading and false statements in corporate filings and committing fraud while he was the attorney and director of Entertainment Art. He was also the public company’s biggest shareholder.

According to the SEC’s securities order, not only did Lubin draft and sign misleading public filings, but also, he concealed their “true ownership” as well as that the fact that a significant chunk of the shares were of a “restricted nature.”

As a result, after Entertainment Art’s name was changed to Biozoom, over 14 million shares were resold illegally in an unregistered distribution, rendering $34M of illicit profits. At the time, the shares had belonged to a shell investor.

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Ex-SAC Capital Advisors LP Portfolio manager Mathew Martoma is asking for another trial. Martoma is serving nine years behind bars after he was convicted for insider trading in Wyeth LLC and Elan Corp. stock based on illegal tips and making $275M in the process. He believes his conviction should be overturned because of a ruling issued by the US Supreme Court last year.

The Supreme Court case involved a man accused of engaging in insider trading after his brother-in-law, a former Citigroup (C) investment banker, gave him the illegal tip. The nation’s highest court upheld the conviction against Bassam Salman in a unanimous ruling. The justices said that a person could be convicted for sharing insider tips with a friend or relative regardless of whether or not there was a profit for the tipper.

Martoma is accused of obtaining confidential information from two physicians involved in clinical trials for an Alzheimer’s drug. His defense attorney is contending that the prosecution did not bring enough evidence to demonstrate that the person who tipped Martoma shared the information because he was paid money. The lawyer also claims that instructions the jurors received were flawed because they allowed for a conviction on the grounds of the promise that the tipper was motivated by the possibility of friendship instead of because of a preexisting personal connection. Prosecutors are arguing that the financial relationship between Martoma and one of the physicians, who testified that he was paid $1K/hour for consulting with Martoma, was sufficient to support the earlier conviction.

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In a Securities and Exchange Commission case linked to parallel criminal charges, the regulator has filed insider trading charges against Avaneesh Krishnamoorthy, the risk management VP of a New York-based investment bank. Krishnamoorthy is accused of trading on confidential information prior to the acquisition of a publicly-traded tech company by a private equity firm. He allegedly made about $48K in illicit profits. Also charged as a relief defendant is his wife Shreya Achar.

According to the SEC, Avaneesh Krishnamoorthy began trading in Neustar Securities after learning that Golden Gate Capital was going to buy the company. He used two brokerage accounts that his employer didn’t know about. Golden Gate Capital had approached the investment bank about financing the acquisition.

Meantime, the U.S. Attorney’s Office for the Southern District of New York has filed its own case against Krishnamoorthy. He faces one criminal securities fraud charge.

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Ex-Oppenheimer Stockbroker Pleads Guilty in Insider Trading Case
David Hobson, an ex-Oppenheimer Holdings (OPY) investment adviser, was sentenced to six months behind bars for insider trading using information provided to him by a friend who was employed with Pfizer Inc. at the time.

Hobson pleaded guilty to the criminal charges against him. He was ordered to forfeit over $385K. His friend, Michael Maciocio, reached a plea deal with prosecutors for his part last year.

Hobson started insider trading in 2008 while employed at RBC Capital Markets and he continued with his illicit activities at Oppenheimer. He was Maciocio’s stockbroker.

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The US Securities and Exchange Commission is charging the partner of a Hong Kong-based private equity firm with securities fraud. The regulator claims that Shaohua (Michael) Yin of Summitview Capital Management Ltd. obtained over $56M of DreamWorks Animation SKG stock by using the US brokerage accounts of five Chinese nationals, including his parents.

When DreamWork’s stock price went up 47.3% after news that Comcast was acquiring it went public, the five accounts made $29M from the DreamWorks trades.

The SEC claims that Yin tried to conceal that he was in charge of the five accounts, which had addresses in Palo Alto and Beijing, but the regulator was still able to identify him as the one behind the suspect trading. Prior to becoming a partner at Summitview Capital, Yin worked for UBS (UBS) and private equity firm Warburg Pincus Asia LLC.

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IT Specialist Accused of Hacking Expedia Executives and Insider Trading

The U.S. Securities and Exchange Commission has filed civil insider trading charges against Jonathan Ly, who worked as a technology specialist for online travel company Expedia. According to the regulator, Ly hacked senior company executives and traded on company secrets ahead of nine announcements between 2013 and 2016.

As a result of his alleged insider trading, Lyn made almost $350K in profits. To settle the SEC case against him, Ly will pay over $348K of disgorgement and more than $27K in interest. This is a deal that still has to be subject to court approval.

Meantime, the U.S. Attorney’s Office for the Western District of Washington has filed parallel criminal charges against Ly.

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In a unanimous decision, the US Supreme Court justices ruled that prosecutors in insider trading cases don’t always have to demonstrate that something of value was exchanged to prove that the crime happened. The court’s ruling comes two years after another decision, in United States v. Newman, raised questions regarding what comprises insider-trading. That decision led to the dismissal of a number of insider trading cases.

This week, however, in Salman v. United States, the nation’s highest court gave the government back some of the power it lost in the earlier federal court case. The justices’ opinion upheld the prosecution of Bassam Salman, a man convicted of insider trading.

Salman admitted to trading on the information given to him by his brother-in-law Maher Kara, a Citigroup (C) investment banker. Prosecutors accused him of making $1.5M by trading on tips about biomedical company acquisitions involving Citigroup clients.

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Stephen A. Cohen and SAC Capital will pay a group of Elan Corp. investors $135M to settle their insider trading case against him and the firm. The plaintiffs had contended that sustained they financial losses because of insider trading that involved Elan shares. A judge still has to approve the settlement.

Ex-SAC Capital money manager Mathew Martoma was convicted two years ago for making $285M for SAC Capital on trades involving Elan and Wyeth, both pharmaceutical companies. He used insider information about the clinical trials of an Alzheimer’s drug that companies were developing together. Martoma is appealing his conviction while serving a 9-year prison sentence.

Although Cohen was not charged with insider trading, his firm pleaded guilty and consented to pay $1.8B in criminal and civil penalties. SAC Capital also changed its name to Point72 Asset Management LP. Cohen, meantime, went from managing other people’s money to only being allowed to oversee his multibillion-dollar fortune.

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