Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, January 28, 2011

SEC Charges Former Galleon Trader with Insider Trading

The SEC today announced insider trading charges against Michael Cardillo, a former trader at the hedge fund investment adviser Galleon Management, LP, for trading ahead of September 2007 announced acquisition of 3Com Corp., and November 2007 announced acquisition of Axcan Pharma Inc.

The SEC’s complaint, filed in federal court in Manhattan, alleges that Arthur J. Cutillo and Brien P. Santarlas, former attorneys with the international law firm Ropes & Grey LLP, misappropriated from their law firm material, nonpublic information concerning the acquisitions of 3Com and Axcan. The SEC alleges that they tipped this inside information, through another attorney, to Zvi Goffer, a former proprietary trader at the broker-dealer Schottenfeld Group, LLC, in exchange for kickbacks. The SEC further alleges that Goffer tipped information about these acquisitions to Craig Drimal, a trader who worked out of the offices of Galleon, who then tipped the inside information to Cardillo. According to the complaint, Cardillo then traded in the securities of 3Com and Axcan on behalf of a Galleon hedge fund, resulting in more than $730,000 in illicit profits.

In a related criminal case filed by the U.S. Attorney’s Office for the Southern District of New York, Cardillo has pled guilty to criminal charges in connection with this insider trading scheme.

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