Securities Law Prof Blog

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

A Member of the Law Professor Blogs Network

Thursday, April 18, 2013

SEC Files Insider Trading Charges Against Former Proprietary Trader

The SEC filed an insider trading case against Joseph M. Mancuso, a former proprietary trader at the registered broker-dealer Schottenfeld Group, LLC, charging him with using inside information to trade ahead of five separate corporate acquisition announcements in 2007, resulting in illicit profits of approximately $350,000. 

The SEC's complaint alleges that Mancuso used material, nonpublic information he was tipped by his good friend and colleague, Zvi Goffer, also a former proprietary trader at Schottenfeld, to trade ahead of the announced acquisitions of Avaya, Inc., 3Com Corp., Axcan Pharma Inc., Hilton Hotels Corp. and Kronos Inc. As alleged in the complaint, the inside information Goffer tipped Mancuso concerning the 3Com, Axcan and Avaya acquisitions was misappropriated by two attorneys at the law firm Ropes & Gray, Arthur Cutillo and Brien Santarlas. The SEC alleges that Cutillo and Santarlas had access to inside information about potential acquisitions involving their firm's clients, and that Goffer paid them kickbacks in exchange for the information, using their mutual friend Jason Goldfarb as a conduit. As alleged in the complaint, Goffer traded on this inside information and tipped the information to Mancuso and others who also traded.

The SEC's complaint alleges that the inside information Goffer tipped to Mancuso concerning the Hilton and Kronos acquisitions came through Gautham Shankar, another former proprietary trader at Schottenfeld. As alleged in the complaint, Shankar was tipped the inside information by Thomas Hardin, a managing director at the hedge fund adviser Lanexa Management. The complaint alleges that Hardin was tipped the information by Roomy Khan, a consultant to a New York-based investment adviser, who had received the inside information from her friend, a credit rating company analyst. The SEC alleges that Goffer also paid kickbacks in exchange for this information. As alleged in the complaint, Goffer traded on this inside information and tipped Mancuso and others who also traded.

The SEC previously charged Goffer, Cutillo, Santarlas, Goldfarb, Shankar, Hardin, and other defendants in connection with this insider trading scheme.

http://lawprofessors.typepad.com/securities/2013/04/sec-files-insider-trading-charges-against-former-proprietary-trader.html

SEC Action | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef017eea5ec3ec970d

Listed below are links to weblogs that reference SEC Files Insider Trading Charges Against Former Proprietary Trader:

Comments

Post a comment