Posted on: July 5, 2023, 03:10h.
Last updated on: July 5, 2023, 03:10h.
The Securities and Exchange Commission (SEC) recently filed insider trading charges against two individuals for trading on non-public information. One of the transactions involved Penn Entertainment (NASDAQ: PENN), from which the pair profited.
The SEC alleges that Steven Teixeira, the chief compliance officer at an international payment processing firm, shared non-public information with his friend Jordan Meadow, a registered investment representative at New York-based broker-dealer Spartan Capital Securities.
According to legal documents recently unsealed in a Manhattan federal court, Teixeira obtained information from his girlfriend’s computer while they were working remotely during the early stages of the coronavirus pandemic. She was an employee of an investment bank that the SEC did not name, but the Wall Street Journal reported that she formerly worked for Morgan Stanley. She had access to undisclosed mergers and acquisitions transactions.
It is believed that one of these deals was Penn Entertainment’s announcement on August 5, 2021, that it would acquire Score Media and Gaming for $2 billion in cash and stock to expand its presence in Canada.
How the Scheme Unfolded
Prior to official announcements, Meadow and Teixeira profited from several deals, including Penn’s takeover of Score Media. Teixeira used a third party to pass on information obtained from his girlfriend’s laptop to Meadow
“As alleged, Teixeira then used the information to purchase call options on several issuers ahead of the announcement of the deals and tipped the information to his friends, including Meadow, so that they could trade as well,” according to the SEC. “The scheme allegedly generated illicit profits of approximately $28,600 for Teixeira, while Meadow made more than $730,000.”
The commission states that Meadow, with information provided by Teixeira, recommended options trades to his clients, resulting in significant financial gains for them and commissions for himself.
While the SEC does not provide specific details about the various trades, Bloomberg reported that Meadow allegedly purchased over 770 call options, presumably in Score Media, before Penn’s announcement of the acquisition. This helped Meadow’s clients make gains exceeding $5 million.
Defendants Facing Civil Penalties, Criminal Charges
The U.S. Attorney’s Office for the Southern District of New York filed criminal charges against Meadow and Teixeira. Teixeira, cooperating with the government, pleaded guilty to 12 counts, including securities fraud.
“The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Teixeira, of New York, and Meadow, of New Jersey, with violating the antifraud provisions of the federal securities laws and seeks permanent injunctive relief, disgorgement with prejudgment interest, civil penalties, and bars on Meadow and Teixeira serving as officers or directors of public companies,” according to the statement.
The SEC has been taking a tougher stance against individuals accused of insider trading. In late June, the commission charged a former Pfizer (NYSE: PFE) employee with insider trading prior to the announcement of a COVID-19 vaccine. The SEC also levied charges against several staff members of the special purpose acquisition company (SPAC) being used to take Trump’s Truth Social social media company public.