Among recent enforcement actions by the Securities and Exchange Commission, a foreign trader and its CEO paid $30 million to settle SEC charges that they used hacked information to trade and the chairman of a medical diagnostics company and two others in a stock manipulation scheme.
In addition, the Financial Indistry Regulatory Authority fined a Florida firm $100,000 and required it to bring in an independent consultant to review how it handled outside business activities.
Ukranian Firm, CEO Pay $30 Million in SEC Settlement
Ukrainian-based Jaspen Capital Partners Ltd. and CEO Andriy Supranonok have agreed to pay $30 million to settle SEC allegations that they hacked major newswire services to trade on company news before the press releases were made public.
According to the agency, Jaspen and Supranonok were among 34 defendants charged in August for a scheme in which two of the defendants surreptitiously hacked into newswire services and transmitted stolen data, such as corporate earnings reports, to a web of international traders, including Jaspen and Supranonok.
That early look at information before it was publicly released brought the traders more than $100 million of illegal profits over a five-year period. The case was filed in U.S. District Court for the District of New Jersey, which entered an asset freeze and other emergency relief against Jaspen and Supranonok, among others.
The SEC said that Jaspen and Supranonok made approximately $25 million buying and selling contracts-for-differences (CFDs) on the basis of hacked press releases stolen from two newswire services between 2010 and 2014 and made additional profits trading on press releases stolen from a third newswire service in 2015.
Without admitting or denying the SEC’s allegations, Jaspen and Supranonok agreed to settle and to return $30 million in ill-gotten gains. The settlement offers are subject to approval by the court.
Litigation continues against the remaining 32 defendants.
Broker Pleads Guilty in Napkin-Eating Insider Trading Case
A former Morgan Stanley broker pleaded guilty to trading on insider corporate tips he got from a middleman who showed him secret notes before chewing and swallowing them at New York’s Grand Central Terminal, Bloomberg reported.
The broker, Vladimir Eydelman, 43, admitted Wednesday in federal court in Trenton, New Jersey, that he traded on information stolen from computers at Simpson Thacher & Bartlett, a New York law firm. The five-year scheme made $5.6 million in profit, according to a statement by U.S. Attorney Paul Fishman. Eydelman was charged in March 2014 and fired by his firm, Bloomberg says.
The SEC announced in July that it had reached a settlement with Frank Tamayo, who was previously charged for passing along insider information on napkins and Post-It notes from a law firm clerk to a stockbroker. To destroy the evidence, Tamayo then ate the napkins or Post-It notes on which the ticker symbols of the companies being tipped about were written.
After being charged, Tamayo agreed to cooperate with the agency, and rendered extensive assistance during the SEC’s investigation. As a result, the proposed final judgment will order him to disgorge more than $1 million of his ill-gotten gains from the scheme, but that payment would be deemed satisfied by the entry of orders of forfeiture or restitution in the parallel criminal case, in which he has pleaded guilty. He will not face a monetary penalty from the SEC.