A 28-year-old analyst from a private New York investment fund was arrested and charged with insider trading after making $1.5 million in ill-gotten gains trading options on his mum’s brokerage account, prosecutors said.
According to the complaint, the analyst, John Afriyie, traded options in ADT’s stock based on material nonpublic information he encountered while working at the fund.
MSD Partners didn’t immediately respond to a request for comment.
In January, private equity firm Apollo Investment Management approached MSD to discuss debt financing for an acquisition of security company ADT Corporation in an all-cash deal. MSD entered into a non-disclosure agreement with Apollo and received access to an electronic data room regarding the ADT deal.
Prosecutors alleged that Afriyie accessed nonpublic information about Apollo’s pending acquisition of ADT in a shared drive folder on his employer’s server.
On 28 separate transactions between January 28 and February 12, Afriyie purchased 2,279 ADT call options for just over $24,000 using his mum’s brokerage account, which he controlled, the complaint said. During this time, ADT’s stock was trading in a range of $24 to $28 per share.
On some days, he was pretty much the only person buying options for ADT’s shares, according to the complaint.
Apollo’s acquisition of ADT was announced on February 16 before the opening bell. The stock closed at $39.64 the deal was announced. Call options also increased in value.
“In February of this year, John Afriyie made a quick $1.5 million profit by trading in options of ADT stock. His profits were not the result of trading acumen, diligent research, or blind luck, but rather the alleged spoils of criminal insider trading,” US Attorney Preet Bharara said in a statement.
Bharara continued: “Afriyie allegedly traded on material nonpublic information he had obtained about a pending acquisition of ADT that had not yet been made public. Afriyie’s attempts to keep his alleged criminal insider trading secret by trading in his mother’s name failed, and thanks to the efforts of the FBI and the SEC, he will now answer to federal securities fraud charges.”
He’s been charged with one count of securities fraud. He faces a maximum of 20 years in prison and a maximum fine of $5 million.