There are two amazing things about the insider trading scandal that is about to be discussed.
- The alleged schemers coded their emails with references to Blue Horseshoe, the code-word used in the movie Wall Street
- The insider tips were being passed between frat brothers
Today the SEC charged Brett Cohen – a business consultant – and his uncle with insider trading in the stock of two biotech companies.
The complaint alleges that a patent agent for San Diego-based Sequenom tipped his actual brother with inside information, which that brother then sent to his frat brother, Cohen.
The patent agent reportedly heard about two corporate events involving Sequenom before the information was publicly released: Sequenom’s offer to acquire Exact Sciences Corporation (EXAS) and Sequenom’s announcement that previously announced test data from its Down syndrome screening test could no longer be relied upon.
According to the SEC, after Cohen received the tips, he used an outdoor pay phone to tip his uncle, David Myers, of Cleveland, who then traded on the illegally obtained information and earned more than $600,000 by doing so.
In a parallel criminal proceeding, the U.S. Attorney’s Office for the Southern District of California filed charges against both Cohen and Myers.
“Cohen and Myers misused Sequenom’s confidential information to enrich themselves at the expense of the company’s shareholders,” said Rosalind R. Tyson, Director of the SEC’s Los Angeles Regional Office.
“They used coded e-mails and other covert methods of communication in a deliberate effort to hide their illegal insider trading scheme.”
The patent agent’s brother sent Cohen an e-mail asking, “[a]ny word related to Blu [email protected]? La Jolla says the times are ripe.”
For those who haven’t seen the movie, in Wall Street, Bud Fox uses the phrase, “Blue Horseshoe loves Anacot Steel,” as code for insider trading.
The complaint alleges that “La Jolla” is a reference to the fact the patent agent lived and worked near La Jolla, Calif.
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