SEC Turns to Data Analysis to Reveal $5M Insider Trading Scheme

25.08.2017

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The U.S. Securities and Exchange Commission (SEC) filed charges against seven men who were involved in the trading on confidential information about hundreds of unannounced potential business dealings.



The SEC staff turned to data analysis to reveal the alleged trading. The tipper who had access to confidential information was an IT consultant at an investment bank. The scheme worked from August 2014 till April 2017 and resulted in more than $5 million in illicit profits. The list of affected companies included Twitter, Monsanto, Cabela’s, etc.



Thanks to the following three tipping chains the data from Daniel Rivas, the trusted insider, was handed over to first-, second-, and third-level tippees.





For about three years, Daniel Rivas provided inside information about unannounced M&A transactions and tender offer transactions involving present and prospective clients of the bank to his friends – James Moodhe, Roberto Rodriguez, Rodolfo Sablon anf Jhonatan Zoquier – who passed the tips to others, including Michael Siva and Jeffrey Rogiers. Siva and Rogiers tipped at least three more persons.



The traders communicated through the encrypted messaging app, used shell companies and code words to conceal their activity.



Both Rivas and Moodhe pled guilty to conspiracy, securities fraud, fraud in connection with a tender offer, wire fraud, and making false statements to law enforcement officials. They were cooperating with the Government in this investigation.



Siva, Rodriguez, Sablon, Zoquier, and Rogiers were each charged with the following offenses – conspiracy, wire fraud, and multiple counts of securities fraud and fraud in connection with a tender offer – which carry the maximum prison terms.




“As alleged, the defendants took advantage of an insider at an investment bank to make millions in illegal profits, trading over 50 times in advance of confidential corporate information. The defendants allegedly used code words and encrypted messages to try to avoid law enforcement detection. But despite their efforts to hide their crimes, the defendants’ insider trading schemes have been exposed, and two have already pled guilty federal crimes. Those who seek to cheat the markets by trading on stolen inside information corrupt the integrity of our nation’s securities markets, and we are committed to stopping them and holding them accountable.” commented on the case the acting US attorney Joon H. Kim.