Sweep! SEC Announces Flurry of Insider Trading Cases

Statement on Insider Trading Enforcement Actions Announced on June 29, 2023

Today, the SEC announced charges against 13 defendants in four separate insider trading schemes:

—Garelick/Shvartsman/Shvartsman/Rocket One Capital LLC (for illegal insider trading in the securities of Digital World Acquisition Corporation);

—Dagar/Bhiwapurkar (for illegal insider trading in the securities of Pfizer Inc.);

—Dupont/Cronin/Mendoza/Kaplan/Feldman (for illegal insider trading in the securities of Portola Pharmaceuticals Inc.); and

—Meadow/Teixeira (for illegal insider trading in the securities of numerous issuers)

The SEC alleges that these defendants, which include corporate executives and insiders, a police chief, and a SPAC board member, made more than $40 million in ill-gotten gains, collectively, from their schemes.

SEC Charges Stockbroker and Friend with Insider Trading

The Securities and Exchange Commission today announced insider trading charges against Jordan Meadow, a registered representative for a New York-based broker-dealer, and Steven Teixeira, the Chief Compliance Officer of an international payment processing company, in connection with their trading based on material nonpublic information that Teixeira obtained from his girlfriend’s laptop while she was working at home during the COVID-19 pandemic.

The SEC’s complaint alleges that Teixeira accessed nonpublic information on possible upcoming mergers and acquisitions of public companies from the laptop of his girlfriend, who was employed at a prominent New York-based investment bank. As alleged, Teixeira then used the information to purchase call options on several issuers ahead of the announcement of the deals and tipped the information to his friends, including Meadow, so that they could trade as well. The scheme allegedly generated illicit profits of approximately $28,600 for Teixeira, while Meadow made more than $730,000. Additionally, according to the complaint, Meadow recommended trades to his brokerage customers based on the material nonpublic information from Teixeira, resulting in millions of dollars in profits for them and hundreds of thousands of dollars in commissions for Meadow.

“Our complaint alleges brazen betrayals of trust by Teixeira….”

SEC Charges Police Chief, Four Others in Connection with Insider Trading Before Pharmaceutical Merger

The Securities and Exchange Commission today filed insider trading charges against five individuals, including a police chief in Dighton, Massachusetts, arising from trading before the announcement of a tender offer by Alexion Pharmaceuticals Inc. to acquire Portola Pharmaceuticals Inc. in May 2020. Four of the defendants traded on nonpublic information obtained, directly or indirectly, from the fifth defendant, and realized more than $2.3 million in ill-gotten gains and tipped others who realized more than $1.7 million in trading profits.

According to the SEC’s complaint, Joseph Dupont was a vice president and part of the acquisition team at Alexion when he knowingly or recklessly tipped confidential information about the acquisition to his close friend Shawn Cronin, the police chief. Cronin allegedly then provided the information to Jarett Mendoza, another close friend, and to family friend Stanley Kaplan, who provided advice to Cronin on trading strategies. In turn, Kaplan allegedly provided the information to his friend and colleague, Paul Feldman. The SEC’s complaint alleges that Cronin, Mendoza, Kaplan, and Feldman purchased Portola stock and/or out-of-the money call options prior to the announcement, on the basis of the material, nonpublic information they received. The complaint further alleges that Kaplan and Feldman passed the information on to other family members and friends, who profitably traded. On the day of the acquisition announcement, Portola’s stock price increased more than 130 percent.

SEC Charges Former Pfizer Statistician with Insider Trading Ahead of COVID-19 Announcement

The Securities and Exchange Commission today announced insider trading charges against Amit Dagar, a former Pfizer Inc. employee, and his close friend and business partner, Atul Bhiwapurkar, for trading in advance of the company’s November 5, 2021, announcement that a randomized, double-blind study of its COVID-19 antiviral treatment, Paxlovid, was successful. Following that announcement in which Pfizer’s CEO referred to the news as a “game-changer” in the global efforts to “halt the devastation” of the pandemic, the company’s stock price increased by nearly 11 percent, the largest single-day price move in the stock since 2009.

According to the SEC’s complaint, Dagar was a senior statistical program lead for the Paxlovid drug trial, which began in July 2021 as part of the company’s efforts to address the global health pandemic. On the day before the Paxlovid announcement, the complaint alleges, Dagar learned material, nonpublic information about the success of the trial. Specifically, the SEC alleges that Dagar’s supervisor informed him via chat that “we got the outcome,” there was a “lot of work lined up,” and that there would be a “press release tomorrow,” to which Dagar responded with “oh really” and “kind of exciting.” Several hours after that exchange, Dagar allegedly purchased short term, out-of-the-money Pfizer call options, including options that expired the very next day, and then tipped Bhiwapurkar, who also purchased similar call options in Pfizer. The complaint alleges that Dagar’s and Bhiwapurkar’s trading generated approximately $214,395 and $60,300 respectively in illicit profits, which amounted to one-day investment returns of 2,458 percent and 791 percent.

SEC Charges Former DWAC Board Member and Others for Insider Trading in DWAC Securities

The Securities and Exchange Commission today filed insider trading charges against Bruce Garelick, a former board member of Digital World Acquisition Corporation (DWAC), a special purpose acquisition company (SPAC); Michael Shvartsman and his firm Rocket One Capital LLC; and Gerald Shvartsman for trading in advance of DWAC’s October 2021 announcement that it had reached an agreement to acquire Trump Media & Technology Group Corp. (TMTG).

The SEC’s complaint alleges that, after DWAC appointed Garelick as a member of its board of directors in September 2021, Garelick learned about, and voted on, material nonpublic actions and updates regarding the negotiations between DWAC and its merger target, TMTG. Garelick, who was separately employed as the chief strategy officer at Rocket One Capital, then allegedly shared those updates with his boss, Michael Shvartsman, who in turn shared them with his brother, Gerald Shvartsman. Each then allegedly purchased DWAC securities on the open market based on the material nonpublic information they learned about DWAC. Michael Shvartsman placed his trades through an account in the name of Rocket One Capital. The defendants then sold their positions shortly after DWAC announced it had signed a merger agreement with TMTG and collectively realized illicit profits of more than $22.9 million from those trades. The complaint further alleges that, despite being a DWAC director and thus having certain reporting obligations, Garelick failed to file SEC Forms 4 and 5 related to his transactions in DWAC securities.

Fidelity joins rush for bitcoin ETF, following BlackRock, Ark Invest

Asset management giant Fidelity Investments is again trying to launch a spot bitcoin exchange-traded fund, according to a Thursday filing.

The move comes two weeks after BlackRock filed for a spot bitcoin ETF, which has long been opposed by the U.S. Securities and Exchange Commission.

Other firms appear to have taken BlackRock’s filing as a sign that the SEC’s stance could soon change. Since then, WisdomTree, VanEck and Invesco have taken the initial steps toward their own funds. Cathie Wood’s Ark Invest filed for changes to its proposed bitcoin fund Wednesday that brought it closer in line with BlackRock’s application.