Insider Trading

SEC Cases: Och-Ziff Hedge Fund Settles FCPA Violation Charges for $413M, Employee is Accused of Insider Trading Prior to Drug Announcement, and Company Pays Fine After Firing Whistleblower

Published on: October 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

NY Hedge Fund to Pay $413M to Settle Civil and Criminal Charges Over FCPA Violations

Och-Ziff Capital Management Group has settled both criminal and civil charges accusing the New York hedge fund of paying bribes to obtain business in Africa. This is the first hedge fund to face punishment over violating the Foreign Corrupt Practices Act.

As part of its settlement with the SEC, Och-Ziff will pay almost $200M to the Commission. Meantime, the hedge fund’s CEO, Daniel S. Och, will pay the regulator almost $2.2M to resolve charges accusing him of causing certain violations. CFO Joel M. Frank also agreed to settle the SEC the charges against him and will pay a penalty.

U.S. Supreme Court Hears Insider Trading Case

Published on: October 6, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Supreme Court is hearing an insider trading case in which a man convicted of the crime is disputing that decision. Bassam Salman claims that he should not have been convicted of insider trading and that the trading he engaged in was not illegal.

Salman made nearly $1.2M trading on information provided by his brother-in-law. The information he traded on had to do with deals involving Citigroup Inc. (C) clients. His relative, Maher Kara, was an investment banker there.

However, as Salman’s lawyer argues, prosecutors have to prove that the alleged source of insider information in insider trading cases obtained a tangible benefit in return for providing the tip. Salman maintains that his brother-in-law did not make such a gain.

Morgan Stanley Charged by Massachusetts for Running Allegedly Unethical Sales Contests

Published on: October 3, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts claims that Morgan Stanley Smith Barney (MS) ran a high-pressure sales contest to give its financial advisers incentive to get clients to borrow funds against their brokerage accounts. Massachusetts Secretary of the Commonwealth William Galvin filed the complaint against the firm.

According to the state, from 1/14 through 4/15, Morgan Stanley conducted two contests in Rhode Island and Massachusetts that involved 30 advisers. The object of the contests were to convince customers to take out loans that were securities-based. It involved them borrowing against the value of securities found in their portfolio. The securities were to be collateral.

Galvin’s office said that the contests urged Morgan Stanley advisers to cross-sell loans that were backed by investment accounts in order to enhance lending business, as well as banking, and stay competitive with other firms. Galvin claims that advisers were told to get clients to establish credit lines even if they had no plans of using them. The state’s complaint said that clients would be targeted after they’d mention certain key “catalysts” including graduations, weddings, and tax liabilities.

SEC Accuses Peruvian Traders of Insider Trading, Charges Anheuser Busch InBev with Whistleblower Protection and FCPA Rule Violations, and Orders an Oil Services Company to Pay $140M Over Accounting Fraud Allegations

Published on: September 29, 2016 | by Shepherd Smith Edwards & Kantas, LLP

SEC Claims Peruvian Attorneys and Broker-Dealer Manager Used Accounts to Insider Trade

The U.S. Securities and Exchange Commission has filed charges against three people in Peru, accusing them of insider trading prior to the merging two mining companies. The regulator wants penalties, disgorgement, and interest.

According to the Commission, HudBay Minerals Inc. employee Nino Coppero del Valle told fellow lawyer and friend Julio Antonio Castro Roca about a tender offer the mining company had turned in to acquire shares in August Resource Corp., which is located in Arizona. Hudbay is based in Canada.

Castro then allegedly traded using this materially nonpublic information via a brokerage account that was held by a shell company in the British Virgin Islands. He is accused of doing this so that the trades couldn’t be traced back to the two of them. They purportedly made over $112,000 in illicit profits.

Hedge Fund Manager Faces SEC Charges For Insider Trading

Published on: September 21, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The SEC has filed insider trading civil charges against Leon G. Cooperman and his Omega Advisors. According to the regulator, the hedge fund manager made illicit profits when he bought Atlas Pipeline Partners securities right before it sold its natural gas processing facility in Oklahoma.

Cooperman is accused of using his position as one of Atlas Pipeline’s biggest shareholder to obtain confidential information about the upcoming sale. This, even after Cooperman and his firm had agreed not to to make trades using the information he was given. When the sale of the facility, for $682 million, was announced publicly, Atlas Pipeline’s stock price went up by over 31%.

The SEC, in its complaint, said that when Cooperman’s firm was sent a subpoena regarding its trading involving Atlas Pipeline securities, Cooperman allegedly spoke to the executive who had given him the nonpublic information and attempted to make up a story about the trading. The executive was reportedly upset to find out that Cooperman had traded before the announcement of the sale.

Ex-Perella Weinberg Partners Managing Director is Convicted of Insider Trading, Giving Tips to His Dad

Published on: August 17, 2016 | by Shepherd Smith Edwards & Kantas, LLP

A jury has Sean Stewart, the ex-managing director of Perella Weinberg Partners LP of insider trading. Stewart is accused of giving his dad confidential tips about five health-care deals.

According to prosecutors, Stewart started giving his dad insider information in 2011 while he was VP of J.P. Morgan Chase & Co.’s (JPM) healthcare investment banking group. He continued to tip his dad when he went to work for Perella. As a result of the insider information, Stewart’s dad, Robert Stewart, and Richard Cunniffe made over $1M in illegal profits. The elder Stewart has already pleaded guilty to the charges against him.

During the trial, the younger Stewart testified that his dad had betrayed him by using the information that he had shared with him during casual conversation. He testified that he lied to compliance lawyers at JPMorgan in 2011 to protect his reputation and his father. He claimed that he never thought that his dad would use the information to make trades.

Robert has already been sentenced to four years of probation for his role after pleading guilty to securities fraud. Also, he had to forfeit $150K in ill-gotten gains. The elder Stewart shared the tips he received from his son with two others, including Cunniffee, who testified that they used the tips to buy stock options. Cunniffee had earlier pleaded guilty to insider trading.

Insider Trading News: Hedge Fund Managers Charged in $32M Scam, Ex-Software Executive and Friends Are Accused of Making Over $500K, and Broker and Friend Allegedly Illegally Traded in Pharmaceutical Stocks

Published on: July 8, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Hedge Fund Managers and an Ex-Government Official Face SEC Charges
The U.S. Securities and Exchange Commission has filed insider trading charges in a $32M insider trading scam. According to the regulator, hedge fund manager Sanjay Valvani unlawfully made almost $32M in profits for hedge funds that invested in healthcare securities because he was privy to insider tips given to him by Gordon Johnston, who used to work at the Food and Drug Administration.

Johnston was no longer at the FDA when he purportedly gave Valvani the insider information, he but still had ties with former colleagues who worked there. He had gone on to work for a trade association that represents generic drug distributors and manufacturers but hid that he also worked as a hedge fund consultant and had access to confidential information about expected FDA approvals for certain companies to be able to make enoxaparin, which is generic drug that helps stop blood clots from forming.

Valvani would then trade before announcements about these approvals became public. The SEC further contends that he would share his tips with hedge fund manager Christopher Plaford, who purportedly made about $300K by insider trading in hedge funds. Plaford also is named in a separate insider trading case.

Pharmaceutical Employee and Broker Accused of Insider Trading
The SEC says that two Rhode Island men made about $448K in illegal profits for themselves and others while insider trading in the stocks of certain pharmaceutical companies. Michael J. Maciocio, who used to work as a planner for Pfizer, used his access to confidential business and clinical information about other pharmaceutical firms that his former employer was thinking of acquiring, or of becoming involved in business relationships with, to trade in the other companies’ stocks.

Ex-Dean Foods Board Member, Pro Golfer Phil Mickelson, and Professional Sports Gambler Are Named in Insider Trading Case

Published on: May 28, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has filed civil charges against professional sports gambler William Walters. He is accused of making $40M from an illegal stock tip given to him by former Dean Foods Company board member Thomas C. Davis. The regulator said that Davis, who owed Walters money, gave him insider information about the company prior to market-moving events.

Professional golfer Phil Mickelson, who is a relief defendant in the case, allegedly traded in Dean Foods securities based on Walter’s recommendation. Mickelson then purportedly took the nearly $1M he made from the trading to help repay the gambling debt he owed to Walters. As a relief defendant, Mickelson is not being charged with insider trading or accused of wrongdoing. He will, however, have to pay back the money he made from trading in Dean Foods securities.

As to why Mickelson won’t be prosecuted, The New York Times reports in the article “How to Get Away with Insider Trading,” this is because of U.S. insider trading laws, which bars trading on nonpublic information only if the information has been used or obtained wrongly. This allows parties involved later on in the “chain of information” to benefit from such rules.

Walters and Davis, however, are charged in this case. The SEC’s complaint said that the illegal trading took place over five years.

Ex-Deutsche Bank Broker Found Guilty for Insider Trading Related to Operation Tabernula Probe

Published on: May 10, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Martyn Dodgson, a former Deutsche Bank AG (DB) broker and managing director, and Andrew Hind, an accountant, were convicted of insider trading in London. The Financial Conduct Authority said that that Dodgson and another broker gave insider information about certain business deals to Hind, who then passed on the information to two other traders. They allegedly made $10.7M from trading half a dozen stocks in what is being called the largest insider trading case in the U.K.

The probe into the insider trading allegations, known as Operation Tabernula, has been going on for nine years. Already, three other convictions have been rendered related to the investigation. According to prosecutors, those involved employed conventional techniques and modern technology to conceal their trades. For example, they would meet at Indian restaurants where they’d hand over money in envelopes. They also purportedly used pay-as-you-go phones and encrypted memory sticks.

After investigators planted a bug in the office of day trader Benjamin Anderson, a conversation was recorded involving Iraj Parvizi, another day trader, in which Dodgson was described. Anderson and Parvizi, who were both acquitted of criminal charges, claimed that they had no reason to believe that the tips they were receiving was insider information.

It was in 2014 that former Moore Capital Management LLC trader Julian Rifat pleaded guilty to insider trading in an offshoot probe of this investigation. He admitted to sharing insider information that he received while employed at the firm to associate Graeme Shelley, who then traded to benefit the two of them. Shelley, who was formerly with Novum Securities, also pleaded guilty to insider dealing with Rifat and associate Paul Milsom, who entered his own guilty plea.

Insider Trading: Ex-Goldman Employee to Pay $900K Fine, Former Harman VP Enters Guilty Plea, and Ex-AMO CEO Asks Judge To Stay Lawsuit

Published on: March 30, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Former Goldman Employee Fined Over $900K For SEC Insider Trading Case
Former Goldman Sachs (GS) compliance worker Yeu Han will pay over $903,000 to settle allegations by the U.S. Securities and Exchange Commission accusing him of insider trading. Han was hired by the firm to develop surveillance software to help Goldman identify illegal conduct, including insider trading and market manipulation.

According to the regulator, Han was employed in the firm’s compliance division. He had access to the emails of other Goldman employees who worked on confidential acquisition and merger deals. The SEC contends that even though Han was aware that this information was privileged and nonpublic, and that he would have to get supervisory clearance and disclose his brokerage accounts to engage in any trading, in December 2014 he started trading in the securities of a number of companies before each one publicly announced acquisition and merger news. These companies included Zulily Inc., Yodlee Inc., KLA-Tencor Corp., and Rentrak Corp.

The Commission is accusing Han of making over $468K through his personal account and more than $434K through the account of a relative. Last October, Han left the United States and went to China, where he is a citizen. In November, the SEC filed the insider trading charges against him.

Ex-Harman International VP Pleads Guilty to Insider Trading
Dennis Hamilton, a former vice president of tax at Harman International Industries Inc. has pleaded guilty to insider trading. For the one count of securities fraud, the 45-year-old faces up to 20 years behind bars—although recommended federal guidelines could help him to procure a one-to-two-year prison term instead.