SEC ANNOUNCES ARREST OF MAN FOR ROLE IN INSIDER TRADING CASE INVOLVING A TIP

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23131 / November 14, 2014

USA v. Robert H. Bray, Case No. 1:14-MJ-5119-JGD in the United States District Court for the District of Massachusetts

USA v. John Patrick O'Neill, Case No. 1:14-cr-10317-WGY in the United States District Court for the District of Massachusetts

Securities and Exchange Commission v. J. Patrick O'Neill and Robert H. Bray, Civil Action No. 1:14-cv-13381 (District of Massachusetts, Complaint filed August 18, 2014)

Boston-Area Defendant in SEC Insider Trading Case Faces Criminal Charges

The Securities and Exchange Commission announced that on November 12, 2014, Robert H. Bray ("Bray") was arrested by the Federal Bureau of Investigation and charged by a criminal complaint with participating in an insider trading conspiracy for trading in the stock of Wainwright Bank & Trust Company ("Wainwright") based on a tip he received from a friend.

The Commission previously charged Bray and J. Patrick O'Neill ("O'Neill") with insider trading in a civil action filed on August 18, 2014. The criminal charges are based on the same conduct underlying the SEC's action. The SEC's complaint alleged that O'Neill, a former senior vice president at Eastern Bank Corporation, learned through his job responsibilities that his employer was planning to acquire Wainwright. According to the SEC's complaint, O'Neill tipped Bray, a friend and fellow golfer with whom he socialized at a local country club. In the two weeks preceding a public announcement about the planned acquisition, Bray sold his shares in other stocks to accumulate funds he used to purchase 31,000 shares of Wainwright. After the public announcement of the acquisition caused Wainwright's stock price to increase nearly 100 percent, Bray sold all of his shares during the next few months for nearly $300,000 in illicit profits.

The Commission also announced that on October 31, 2014, the United States Attorney's Office for the District of Massachusetts filed a criminal Information against O'Neill. The criminal Information charges O'Neill with one count of conspiracy to commit securities fraud. O'Neill was initially charged by a criminal complaint when he was arrested in August 2014.

The SEC's action, which is pending, seeks injunctions against each of the defendants from further violations of the charged provisions of the federal securities laws, disgorgement of ill-gotten gains, and civil penalties.

SEC ANNOUNCES FORMER SECURITIES PROFESSIONAL WILL PAY FINE AND SENTENCED TO PRISON

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Former Securities Professional Aleksey Koval Settles Insider Trading Case

The Securities and Exchange Commission announced that on October 7, 2013, the Honorable Alvin K. Hellerstein of the United States District Court for the Southern District of New York entered a final judgment against Aleksey P. Koval a/k/a Alexei Koval, formerly a registered securities professional. Koval had been charged with involvement in a long-running insider trading scheme in which a former UBS investment banker tipped Koval about eleven impending acquisitions, tender offers, or other business combinations. Koval traded on the basis of that information and tipped another couple, who also participated in the trading.

The Commission's complaint, filed on March 24, 2010, alleged that, from at least July 2005 through February 2009, Koval participated in an insider trading ring that netted over $1 million in illicit profits. According to the complaint, Koval traded securities in each of the impending corporate transactions based on material, nonpublic information which he obtained from Igor Poteroba, an investment banker in UBS's Global Healthcare Group. Pursuant to the insider trading scheme as described in the complaint, Koval also tipped his friend, defendant Alexander Vorobiev. In a parallel criminal proceeding, Koval pleaded guilty to three counts of securities fraud, was ordered to pay a forfeiture of $1,414,290, and was sentenced to twenty-six months of imprisonment.

Koval consented to the entry of a judgment that permanently enjoins him from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and Rule 14e-3 thereunder. In addition, the final judgment found Koval liable for disgorgement in the amount of $1,086,457, representing profits obtained as a result of the conduct alleged in the Complaint, together with prejudgment interest in the amount of $159,620, with those amounts deemed satisfied by the criminal forfeiture order. The Commission determined not to seek a civil penalty in light of Koval’s term of imprisonment.

Separately, the Commission today issued an administrative order that bars Koval from association with any investment adviser, broker, dealer, municipal securities dealer, or transfer agent, and from participating in any offering of a penny stock, based on his criminal conviction in the parallel proceeding.

SEC ANNOUNCES WHISTLEBLOWER AWARDS

FROM:  SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission announced that three whistleblowers have been awarded more than $25,000 combined for tips and information they provided to help the SEC and Justice Department stop a sham hedge fund.

This is the first installment of anticipated payments to the whistleblowers as additional assets are collected from the purported hedge fund manager.  The whistleblowers are expected to ultimately receive approximately $125,000 in total.

The SEC issued an order earlier this summer rewarding each of the three whistleblowers with 5 percent of the money that the SEC ultimately collects from its enforcement action against Locust Offshore Management and its CEO Andrey C. Hicks.  In cases where there are related criminal proceedings in which money is collected by another regulator, a provision in the whistleblower rules allows whistleblowers to then additionally apply for an award based off the other regulator’s collections in what qualifies as a “related action.”  The Commission subsequently approved 5 percent payouts to each whistleblower for money collected in the related criminal action.

Hicks pled guilty on Dec. 12, 2012, to five counts of wire fraud and consented to the forfeiture of his interest in property previously seized by the Justice Department.  He was sentenced to 40 months in prison.  Approximately $170,000 has been administratively forfeited in the criminal proceeding – money that is deemed collected for purposes of issuing whistleblower awards.  Therefore, the three whistleblowers will now receive $8,505 each.  Additional payments can be made to these whistleblowers upon forfeiture of the additional assets that have been seized.

The aggregate value of assets seized from Hicks is estimated to be approximately $845,000, and the whistleblowers are expected to ultimately receive 15 percent of this amount for a combined total of approximately $125,000.

The SEC’s order does not identify the whistleblowers, whose confidentiality is protected under the SEC’s whistleblower program.  The order states that two of the whistleblowers provided information that prompted the SEC to open an investigation and stop the scheme before more investors were harmed.  The third whistleblower identified key witnesses and confirmed information the other two whistleblowers provided.

The SEC’s whistleblower program is authorized under the law to reward individuals who offer high-quality, original information that leads to an SEC enforcement action in which more than $1 million in sanctions is ordered.

FORMER TRADER SETTLES CHARGES IN INSIDER TRADING/KICKBACK SCHEME

FROM: SECURITIES AND EXCHANGE COMMISSION

Former Trader Emanuel Goffer Settles SEC Insider Trading Charges

 The Securities and Exchange Commission announced today that on June 7, 2013, The Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York, entered a final judgment against Emanuel Goffer in SEC v. Cutillo et al., 09-CV-9208, an insider trading case the SEC filed on November 5, 2009. In its complaint, the SEC charged nine defendants, including Goffer, a former proprietary trader at the broker-dealer Spectrum Trading, LLC, with insider trading ahead of corporate acquisition announcements.


The SEC's complaint alleged that Zvi Goffer, Emanuel's brother, orchestrated this insider trading scheme in which an attorney with the law firm Ropes & Gray LLP misappropriated from the firm material, nonpublic information concerning potential corporate acquisitions, and tipped the inside information, through another attorney, to Zvi, in exchange for kickbacks. The complaint further alleged that Zvi tipped the information to a number of individuals, including his brother Emanuel. As alleged in the complaint, the tips related to potential acquisitions involving Ropes & Gray clients, including the acquisitions of Alliance Data Systems Corp., Avaya Inc. and 3Com Corp. As alleged in the complaint, Emanuel Goffer traded on the inside information he received from his brother, resulting in illicit profits of more than $1.3 million.

To settle the SEC's charges, Goffer consented to the entry of a final judgment that: (i) permanently enjoins him from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders disgorgement plus prejudgment interest of $1,546,021. The disgorgement obligation will be off-set in part by a forfeiture order in a related criminal case, and the remainder waived in light of his financial condition. In related administrative proceedings, Goffer also consented to the entry of an SEC order barring him from association with any broker, dealer, investment adviser, municipal securities dealer or transfer agent, and barring him from participating in any offering of a penny stock. In the related criminal case, Goffer was convicted of securities fraud and conspiracy to commit securities fraud, and was sentenced to three years in prison and ordered to forfeit $761,623. United States v. Emanuel Goffer, 10-CR-0056 (S.D.N.Y.).