For the benefit of newbies that are unfamiliar with the term, Insider trading is the act of trading in the stock of a public firm by a person who, for any reason, possesses non-public, material knowledge about that stock. Depending on the time the insider makes the trade, insider trading may be either legal or illegal.
When the relevant information is still private, insider trading is illegal and can lead to severe penalties for individuals that participate in it.
The U.S. Securities and Exchange Commission released a press release on the 25th of July, 2022. The press release contained details of the alleged accusations of insider trading by Stephen Buyer.
Stephen Buyer is a former U.S. congressman from Indiana and also the founder of the Steve Buyer Group, a consulting and lobbying firm that was set up after he stopped serving in 2011.
According to the agency, Buyer exploited his position to buy company shares in 2018 & 2019 in advance of important announcements, then sold them for a sizable profit after the information became official and drove up the stock price.
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“When insiders like Buyer – an attorney, a former prosecutor, and a retired congressman – monetize their access to material, non-public information, as alleged in this case, they not only violate the federal securities laws but also undermine public trust and confidence in the fairness of our markets,” said Gurbir S. Grewal, Director of the SEC Enforcement Division. “We are committed to doing all we can to maintain and enhance public trust by leveling the playing field and holding Buyer accountable for illegally profiting from his access.”
According to the SEC, on a golf outing with a client who was a T-Mobile executive in 2018, Buyer heard about T-Mobile’s intentions to purchase Sprint. The following day, he started buying Sprint shares. He later purchased 112,675 Sprint shares for around $568,000 over several other days while using four other accounts, according to an official report.
Buyer sold his Sprint shares for more than $107,000 after the firms announced their almost $27 billion merger, which created the second-largest telecom carrier in the country, the SEC claimed.
The agency claimed that in addition to using various accounts, Buyer made attempts to hide his trading activity. Authorities claimed he printed an investment research paper revealing insider trades in Sprint shares, with notes on it to make it appear as though his trading was influenced by open information.
In 2019, he allegedly bought insider stock of Navigant amounting to about $1 million using multiple accounts, two months before the company acquisition became public, and after the news became public that Navigant would be acquired by Guidehouse, he sold them. The Navigant stock sale netted approximately $227,000 in profit.
Regulators claimed that Buyer attempted to hide the insider trading by using six different accounts (including his accounts, joint accounts with his wife and son, his wife’s personal account, and the same acquaintance’s account previously involved in the Sprint trading) and emailing a public research document to himself and his son to create the impression that his stock purchases were motivated by publicly available data rather than material non-public information.
Officials from the SEC seek to remove Buyer as an officer and director of any corporation, as well as to pay back $335,000 in illicit gains, plus interest and penalties. Federal officials are also requesting disgorgement from Joni Lynn Buyer, Buyer’s wife despite being cleared of all charges.
Parallel to the SEC case, the U.S. attorney’s office for the Southern District of New York is also exploring criminal charges. Buyer’s lawyer, Andrew Goldstein of Cooley, insists that his client is guiltless. His stock transactions were legal. He anticipates swift vindication, according to a statement he released.
Carolyn Winters and Timothy Halloran, with Jessica Regan’s aid, have been leading the SEC’s investigation. D. Mark Cave is in charge of the investigation. Mr Halloran, under Melissa Armstrong’s direction, will serve as the case’s principal attorney.
The federal insider trading probe that led to the indictment of Stephen Buyer and eight other people including technology company executives, an in-training FBI agent, and an investment banker has been considered one of the most significant attacks on insider trading in a decade. The four unrelated illegal insider trading schemes were revealed on Monday in New York City.
A prosecutor and other federal officials expressed renewed enthusiasm for such indictments in the future, calling it one of the most important attacks by law enforcement on insider trading in a decade. According to them, defendants located on both coasts and in middle America made millions of dollars in illicit profits as a result of the cheating.
Stephen Buyer has been charged with four charges of securities fraud, each of which carries a maximum sentence of 20 years in prison. He was arrested on the 25th of July, 2022 and U.S. District Judge Richard M. Berman has been delegated to the case.
We sure will keep you updated on this case so you are encouraged to stay in the loop for all updates for us.
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