Oregon Man Charged With Securities Fraud, Insider Trading

Oregon Man Charged With Securities Fraud, Insider Trading

John Kinnucan and his firm Broadband Research Corporation from Oregon have been charged with insider trading.  The charges have been leveled against them by the Securities and

John Kinnucan insider trading

John Kinnucan

Exchange Commission (SEC).  The SEC has filed a civil injunctive action against Kinnucan as part of their ongoing investigation of insider trading.  The action has been filed in the United States District Court for the Southern District of New York.

Kinnucan also faces charges of one count of wire fraud and one count of securities fraud.  The expert networks investigation has yielded details on widespread insider trading rings involving investment advisory firms and hedge funds.  22 defendants have been charges by the SEC in several enforcement actions.  Big companies like Dell, Marvell Technology and Apple among others have had their securities subject to insider trading.  The ill gotten gains are in the vicinity of $110 million.

Kinnucan managed to pull this off by stating that he was supplying clients with above-board research on these publicly traded companies.   But he was actually giving clients tips about non- public information, according to the charges.  This non-public information was obtained by Kinnucan from prohibited sources inside the companies.  Kinnucan got handsomely paid by portfolio managers and hedge fund analysts.  He received hefty amounts of money from investment advisers as well.  Some other weapons of Kinnucan’s “trade” included ski trips and free lunches provided to his sources of income.

Kinnucan and his firm managed to generate several hundred thousand dollars all within the span of one year.  Take for instance the information he obtained illegally from F5 Networks Inc.  Kinnucan unearthed the fact that the firm had done better than expected as far as financial results went.  On knowing that the firm had done well financially, Kinnucan relayed this information even before the public announcement of the same, to several clients who used this information to generate profits (or avoid losses depending on how you look at it) worth almost $1.6 million.

The SEC is slapping Kinnucan with violations under several sections and is seeking the payment of financial penalties and disgorgement of their ill gotten gains.  It is also pursuing permanent enjoinment of future violations.

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