A stockbroker and a clerk from a top corporate law firm were charged with insider trading in a scheme that involved a middleman swallowing illicit tips that were written on Post-It notes, the Securities and Exchange Commission said in a release.
Vladimir Eydelman, 42, who worked at Oppenheimer and is currently with Morgan Stanley, and Steven Metro, 42, a managing clerk at Simpson Thacher & Bartlett, are accused of engaging in a four-year long scheme that netted $US5.6 million in ill-gotten gains.
According to the SEC, Eydelman and Metro carried out the scheme by allegedly using a mutual friend as a “middleman” to exchange the material information. (The middleman is a cooperating witness in this case.)
The SEC claims that Metro would find out non-public information from deals his law firm was working on by accessing the firm’s confidential computer records.
Metro would then arrange to meet the middleman at a New York City coffee shop or bar. During these meetings, Metro would type stock ticker symbols on his cell phone screen and point to indicate which company was being acquired in the transaction, the SEC release alleges. He would also indicate the announcement date and the acquisition price, the regulator alleges.
The SEC alleges that the middleman would then arrange to meet up with Eydelman, the stockbroker, in Grand Central Station. While in the train station, the middleman would allegedly show Eydelman what was written on the Post-it note or napkin and then he would chew it up and swallow it.
The complaint says that they did this for more than a dozen companies.
Metro and Eydelman were arrested on Wednesday morning. They face both civil and criminal charges.
Metro is charged with nine counts of securities fraud. Eydelman is charged with eight counts of securities fraud. Both of them have been charged with four counts of tender offer fraud, according to a release from New Jersey U.S. Attorney Paul J. Fishman.