Regulators Bust Conspiracy That Made Over $30 Million in Unlawful Insider Trading Profits

Regulators Bust Conspiracy That Made Over $30 Million in Unlawful Insider Trading Profits

The SEC announced that it had obtained final judgments on consent against Jason Pflaum and Walter Shimoon in its insider trading case, SEC versus Marc Anthony Longoria.

It was the SEC’s complaint in February 2011 that employees and consultants of an ‘expert network’ firm, Primary Global Research LLC, a New York based hedge fund, its portfolio managers and analysts had traded illegally on information received from various technology company employees who were also functioning as expert network consultants.  This information was not in the public domain and the trades constituted insider trading.

Material and non-public information out of companies such as Seagate, Advanced Micro Devices, Western Digital, Fairchild Semiconductor, and Marvell Technology Group was used to trade on the exchanges and resulted in illegal profits in excess of $30 million.

Jason Pflaum, one of the accused and a former analyst employed at Barai Capital Management, had also been a recipient of material non-public information relating to publicly listed, exchange traded companies, and used this information to trade shares of these companies along with co-accused Samir Barai.  Pflaum previously admitted guilt in United States v. Pflaum to charges of conspiracy and securities fraud, and is now cooperating with the government and the SEC on several related investigations.

The consent judgment against Pflaum prohibits him from continuing violations of the Securities Acts and the Exchange Act, and orders him to pay an amount of $101,943 as disgorgement and $11,872.38 as pre-judgment interest. He is also barred from associating with various intermediaries in the financial markets. No civil penalty was imposed in view of his cooperation with the SEC.

Walter Shimoon, a former Vice President of Business Development at Flextronics International Ltd, also functioned as a paid consultant for PGR. According to the SEC, around the second half of 2008 and later, Shimoon handed over extensive, material and non-public information concerning Flextronics and its customers to PGR and its hedge fund clients, who used the same to traded illegally.

As in the case of Pflaum, Shimoon was the subject of a parallel criminal case, United States v. Shimoon, in which he pleaded guilty to conspiracy and security fraud. He has been cooperating with the SEC on related investigations.

The consent judgment against Shimoon prohibits him from continuing violations of the Securities Acts and the Exchange Act and orders him to pay an amount of $44,175 plus prejudgment interest of $6099.39 as disgorgement. He is permanently disbarred from acting in any capacity as an officer or a director in a public company. In view of his cooperation, the SEC did not impose a civil penalty.

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