The Securities and Exchange Commission has charged seven individuals with insider trading based on tips allegedly received from an IT consultant who worked on an M&A database at a large un-named New York bank.
According to the SEC, Daniel Rivas, a former IT employee of a large bank, was at the centre of the alleged scheme, misusing his access to the bank’s computer system to spill the beans on 30 impending M&A transactions over a three-year period from from October 2014 to April 2017.
“We allege that this case involves repeated insider trading based on tips about dozens of confidential mergers and acquisitions stolen by an IT employee at a bank,” says Jina Choi, director of the SEC’s San Francisco Regional Office. “IT employees are often entrusted with broad access to incredibly valuable, nonpublic information and have a duty to safeguard that information.”
The watchdog alleges that Rivas used handwritten notes and self-destructing messaging apps to pass on information to at least three separate insider trading rings, who profited to the tune of millions of dollars in speculative trading. Two of Rivas’ friends in Florida are alleged to have turned less than $100,000 into more than $2 million in profits in just under a year by making aggressive options trades based on the confidential information.
Steven Peikin, co-director of the SEC Enforcement Division says the use of new data analysis tools helped it root out the abuse uncovered in this and other cases. The regulator struck a five year, $90 million contract with big data outfit Palantir Technologies to help it sniff out insider trading in October 2015.
“The tippers and traders in this case are alleged to have used various methods to try to cover their tracks, but their efforts failed,” says Peikin. “These charges reflect our continued use of sophisticated tools to detect and root out secretive and wide-reaching insider trading schemes.”