[credit provider=”James Merithew, Wired.com”]
The insider trading scandal has hit New York City law firms after the FBI charged a trader and a M&A lawyer with insider trading this morning.Garrett Bauer and Matt Kluger are charged with conspiracy to commit securities fraud.
Here’s what the Feds have on them, according to their charges. It’s a lot.
Scroll down to see how much they made off each insider trade.
How it began
In or about the summer of 1994, Kluger, who was then in law school at NYU and working as a summer associate at Cravath, contacted the “middleman” and told him, in substance and in part, that “I’ve got something,” meaning that he had access to inside information… Kluger explained that he could learn of merger activity before the information was public… The “middleman” agreed to help find individuals willing to buy and sell stocks based on the inside information.
The sneaky way Kluger stole information about M&A deals he *wasn’t* working on from the office
“As the scheme developed, and in an effort to avoid law enforcement detection, Kluger was careful to steal and disclose information about deals on which he did not personally work, but which he learned about by searching his law firm’s computer system…
“Bauer purchased shares for himself, Kluger, and their “middleman,” in his trading accounts and quickly sold those shares once the transaction was publicly announced. When Bauer obtained the illicit profits from selling the shares, he gave the middleman both Kluger’s and his portions of the proceeds in cash — often tens of hundreds of thousands of dollars at a time — that Bauer withdrew from ATM machines.”
Kluger, the middleman, Bauer each used 1 pre-paid cell phone per deal to pass the info
“Kluger, Bauer and the middleman began communicating about the scheme through pay phones and prepaid cell phones which they disposed of after each deal. When Kluger had inside information about a subsequent deal, he contacted the middleman, usually by calling him from a pay phone, to tell the middleman that Kluger had obtained info.
“Following the pay phone call, the middleman and Bauer bought new pre-paid phones with cash. Kluger then called the middleman on the prepaid cell phone and gave him the info. The middleman then called Bauer and gave the info to him so that Bauer could trade on it.”
Here’s how they profitted from those trades (the companies with a * are Wilson Sonsoni clients):
Here’s the evidence of those trades occurring: