Insider trading bust: Trader-attorney duo made over $32 million
Federal agents arrest an attorney and stockbroker who allegedly used prepaid phones and inside information to make millions during a 17-year insider-trading partnership.
Federal authorities on Wednesday arrested a New York stockbroker and an attorney in Washington, D.C., for their alleged involvement in an insider-trading scheme that officials say continued for 17 years.Skip to next paragraph
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The attorney, who worked in the mergers and acquisitions department of Wilson Sonsini Goodrich & Rosati, used his position as a senior associate to obtain sensitive, confidential information about pending deals. The lawyer then passed the information to another person who forwarded it to the stockbroker in New York.
This is the latest of several recent cases investigated under the auspices of the Obama administration’s Financial Fraud Enforcement Task Force.
How it worked
The broker purchased shares in the involved company, in anticipation of the company’s stock rising once the pending deal became public knowledge. Once the stock price jumped, the broker would quickly sell the stock and divide the profits among the three alleged co-conspirators. The proceeds were paid in cash through multiple ATM withdrawals from the trader’s account.
The middleman in the alleged scheme is identified only as CC-1, or co-conspirator No. 1. It appears from court documents that CC-1 is cooperating with investigators.
They both face 15 charges, including conspiracy to commit securities fraud, securities fraud, money laundering conspiracy, and obstruction of justice.
They face up to five years in prison and a $250,000 fine on the securities fraud charge, and 20 years in prison and a $500,000 fine for each of the other charges.
The alleged crimes
“The impact of crimes commonly referred to as ‘insider trading’ is unmistakable,” said FBI Special Agent in Charge Michael Ward. “Millions of investors have entrusted their life savings to the integrity of the financial markets and the belief of a level playing field. Insider trading corrupts the process and tilts the playing field in favor of those privileged few with access to information not available to the public.”