The SEC charged seven individuals with insider trading in a scheme involving "tipping and trading on inside information about dozens of impending corporate mergers and acquisitions, and tender offers." In a parallel action, the U.S. Attorney Office for the Southern District of New York unsealed criminal charges against the same individuals.

According to the SEC Complaint, an IT employee of a large multinational bank used his position in the bank's capital markets technology group to gain access to "highly-confidential information" about forthcoming corporate transactions. The employee allegedly passed that information to several individuals who then used the tips to make advantageous trades. Those individuals included (i) the employee's girlfriend's father, who is alleged to have passed the information to a financial advisor, who then passed the same tips to a client, (ii) two friends based in Florida and (iii) a friend based in New Jersey, who passed the information to yet another individual. The employee and the other defendants allegedly used coded conversations, a smartphone app that sent "encrypted, self-destructing messages" and shell companies to conduct their insider trading.

The SEC touted its Market Abuse Unit Analysis and Detection Center for uncovering the insider trading by "using data analysis tools to detect suspicious patterns." SEC Enforcement Division Co-Director Steven Peikin applauded the Commission's utilization of advanced analysis tools:

"The tippers and traders in this case are alleged to have used various methods to try to cover their tracks, but their efforts failed. These charges reflect our continued use of sophisticated tools to detect and root out secretive and wide-reaching insider trading schemes."

Commentary / Steven Lofchie

The SEC continues to send a message that it is utilizing improved technological capabilities to catch sophisticated insider traders.

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