Insider Trading

December 11, 2017

The Securities and Exchange Commission today charged a former day trader with making more than $1 million in illegal insider trading profits as part of a ring that allegedly stole confidential information from investment banks and clients so they could trade in advance of secondary stock offerings. The SEC alleges that Joseph Spera schemed with former colleagues, posing as legitimate portfolio managers to induce investment bankers to bring them ''over the wall'' and share nonpublic details about upcoming secondary offerings while agreeing not to disclose the information to others or trade before the offerings were announced.  Spera and the others involved allegedly violated those agreements and tipped each other with confidential information that enabled them to trade for a profit ahead of public announcements. SEC

November 1, 2017

A petroleum engineer who worked at Texas-based energy company Apache Corporation has agreed to settle SEC charges that he conducted insider trading ahead of a market-moving announcement about the company’s discovery of a significant new oil source. The SEC alleges that Christopher J. Lollar traded on nonpublic information while working in the company’s San Antonio office that was performing the geologic and geophysical work to explore and develop the newly discovered resource play called Alpine High.  Lollar allegedly conducted trades in Apache shares and call options in the days and weeks leading up to the company’s Alpine High announcement on Sept. 7, 2016.  The value of Lollar’s brokerage account skyrocketed approximately 2,700 percent after the announcement, and his alleged profits from insider trading totaled $214,295.07. SEC

September 29, 2017

The Securities and Exchange Commission today charged Shane P. Fleming, a former executive at Life Time Fitness Inc., a middleman tipper, and six traders with insider trading ahead of the announcement that the company would be purchased and taken private. In a complaint filed in U.S. District Court in the Northern District of Illinois, the SEC alleges that Fleming, a former vice president of sales at Life Time Fitness, learned of the merger discussions on or before Feb. 23, 2015 and tipped his friend and business partner Bret J. Beshey with the understanding that Beshey would use the information to make a profit and split those profits with Fleming.  The SEC alleges that rather than trade in his own name, Beshey tipped his friends Christopher M. Bonvissuto and Peter A. Kourtis with the understanding that both men would kick back a portion of their trading proceeds to Beshey.  According to the SEC’s complaint, Kourtis tipped his friends Alexander T. Carlucci, Dimitri A. Kandalepas, Austin C. Mansur, and Eric L. Weller, and asked Carlucci, Mansur, and Weller to give him a portion of any profits they made from trading on the information, which they agreed to do. SEC

September 26, 2017

The Securities and Exchange Commission today charged Jason Napodano with insider trading prior to the publication of research reports and articles he authored with the false disclaimer that he wasn’t trading in the companies being covered.  He agreed to settle the charges and be barred from trading in penny stocks for the rest of his life. The SEC alleges that Napodano, who headed a division called Zacks Small Cap Research within a larger investment research firm, misled investors in penny stocks by representing that he wasn’t trading or holding positions in the companies he was writing about while secretly trading the same stocks based on nonpublic information about the publication date of his research.  In an effort to evade detection, Napodano allegedly limited his profits from each illegal trade by taking small positions and closing the positions shortly after his reports and articles were published. In addition to a permanent penny stock bar, Napodano agreed to pay full disgorgement of his insider trading profits totaling $143,865.48 plus interest of $17,620.87 and a penalty of $143,865.48.  The settlement is subject to court approval. SEC

September 20, 2017

The Securities and Exchange Commission today charged Peter C. Chang with insider trading in company stock by using secret brokerage accounts held in the names of his wife and brother. The SEC alleges that Chang, who also was the founder and chairman of the board at Alliance Fiber Optic Products, generated more than $2 million in illicit profits and losses avoided by trading on nonpublic information and tipping his brother ahead of two negative earnings announcements and the company’s merger.   According to the SEC’s complaint, Chang was the company’s largest shareholder and required under the federal securities laws to disclose his ownership of company securities as an officer and director.  Chang allegedly traded company shares secretly in the family member accounts, often times from his work computer after attending board meetings where confidential information was discussed. SEC

September 7, 2017

The Securities and Exchange Commission today announced insider trading charges against Brett Kennedy who allegedly leaked confidential information to his former fraternity brother in advance of a company earnings announcement so they could turn an illegal profit.  The college friend and his trading partner also are charged in the SEC’s complaint. The SEC alleges that Kennedy accessed nonpublic 2015 first quarter earnings information without authorization while working at Amazon and shared it with Maziar Rezakhani, who illegally traded on the financial results before their public release to make more than $116,000 in illicit profits. SEC

August 31, 2017

The Securities and Exchange Commission today charged an accountant and three others with insider trading on market-moving news about the New Jersey-based pharmaceutical company where the accountant formerly worked. The SEC's complaint, filed in federal court in New Jersey, alleges that Evan R. Kita, a CPA and former accountant at Celator Pharmaceuticals Inc., tipped two of his friends with confidential information about the clinical trial results for Celator’s cancer drug and its acquisition by Dublin-based Jazz Pharmaceuticals Plc almost three months later.  Celator's stock rose more than 400 percent in March 2016 when it announced positive results for its drug to treat leukemia, and Jazz Pharmaceuticals offered to pay a hefty premium in May 2016 to acquire Celator. According to the SEC's complaint, Daniel Perez and Richard Yu purchased Celator stock based on Kita's tips before the two announcements and agreed to share their trading profits with him.  The SEC alleges that Richard Yu passed Kita's tips to his father, Chiang Yu, who also traded in advance of both announcements.  To avoid detection, Kita allegedly communicated with Perez and Richard Yu through an encrypted smartphone application. SEC

August 21, 2017

The Securities and Exchange Commission today announced that hedge fund advisory firm Deerfield Management Company L.P. has agreed to pay more than $4.6 million to settle charges that it failed to establish, maintain, and enforce policies and procedures reasonably designed to prevent the misuse of inside information, including information about confidential government decisions. The case relates to insider trading charges that the SEC recently filed against current and former Deerfield analysts, a political intelligence analyst who passed them information, and an employee at the Centers for Medicare and Medicaid Services (CMS). According to the SEC’s order, Deerfield conducted extensive research in the health care sector to help inform its investment decisions, and engaged research firms specializing in political intelligence about upcoming regulatory and legislative decisions.  But Deerfield’s policies and procedures required only an initial review of the research firms’ own policies and procedures, and Deerfield otherwise placed the burden on its own employees to police themselves by identifying issues and informing supervisors. SEC

August 16, 2017

The Securities and Exchange Commission today announced insider trading charges against seven individuals who generated millions in profits by trading on confidential information about dozens of impending mergers and acquisitions.  Data analysis allowed the SEC’s enforcement staff to uncover the illicit trading despite the traders’ alleged use of shell companies, code words, and an encrypted, self-destructing messaging application to evade detection. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today unsealed criminal charges against the same seven individuals. According to the SEC’s complaint, Daniel Rivas, a former IT employee of a large bank, was at the center of the alleged scheme, misusing his access to a bank computer system to tip four individuals who traded on the information. SEC  See also, October 2018 guilty pleas.