CALIFORNIA: An ex-day trader and three associates posed as financial portfolio managers and got access to confidential information they used in a cross-country insider trading scheme that netted more than $4.4 million in illegal profits, federal authorities charged.
California resident Steven Fishoff, 58, a family member and two friends allegedly approached investment bankers about investing in secondary stock offerings scheduled to be issued by publicly traded firms, according to criminal and civil actions filed by federal prosecutors and the Securities and Exchange Commission.
The four allegedly got secret details after they promised not to disclose or trade on the information before it was made public. But authorities charged the suspects violated the agreements by exchanging secret tips about upcoming secondary offerings expected to depress share prices of at least 14 companies between June 2010 and July 2013.
The companies included hydrogen and fuel-cell technology firm Plug Power (PLUG), gold producer Solitario Exploration & Royalty (XPL) and others, the SEC complaint charged.
The suspects allegedly shorted the stocks, and then profited from short sales executed when the share prices dropped after details of the secondary offerings were made public.
The group later expanded the scheme to include gaining access to details of confidential negotiations between pharmaceutical firms Biogen (BIIB) and Sangamo BioSciences (SGMO) about a lucrative licensing agreement, the SEC complaint charged. Using that information, the four allegedly bought shares that rose in value when the licensing agreement was announced in January 2014.
Suspects charged with Fishoff in the criminal and civil cases include his brother-in-law, New Jersey resident Steven Costantin, 54, California neighbor Ronald Chernin, 66, and Paul Petrello, 53, a friend and former day trader who lives in Florida.
FBI agents arrested the four at their homes Wednesday morning. The suspects were scheduled to make initial individual appearances before federal magistrates in California, New Jersey or Florida.
“They allegedly rigged the game so they would always win, and their profits came at the expense of legitimate investors,who were not privy to this inside information,” New Jersey U.S. Attorney Paul Fishman said in a statement announcing the allegations.
But the alleged short-selling scheme proved to be short-sighted, because the suspects “overlooked the fact that their trading patterns would be detected and they would be caught by law enforcement,” said Sanjay Wadhwa, an enforcement official in the SEC’s New York regional office.
