SEC Charges Three With Insider Trading In Connection With Company – Mondaq News Alerts

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United States:

SEC Charges Three With Insider Trading In Connection With Company “Pivot” To Blockchain


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The SEC charged three individuals with an insider
trading scheme involving disclosure of confidential information in
connection with a soft drink manufacturer’s shift in its
primary business “towards the exploration of and investment in
opportunities that leverage the benefits of blockchain
technology.”

In a Complaint filed in the U.S. District
Court for the Southern District of New York, the SEC alleged that
the primary shareholder of the company tipped a broker with
material nonpublic information regarding the announcement of the
business shift, and that the broker in turn tipped a co-conspirator
who purchased 35,000 shares in the company. The company made the
announcement the following day, causing the intraday stock price to
spike 388 percent. The SEC stated that, within two hours of the
announcement, the co-conspirator sold all shares purchased the day
before, realizing $162,500 in profits.

The Complaint alleges the individuals violated 
Section 10(b)
 of the Exchange Act and SEA Rule 10b-5 (“Employment of
manipulative and deceptive devices”).

The SEC is seeking (i) permanent injunctions, (ii) disgorgement,
(iii) civil monetary penalties and (iv) an officer and director bar
as to the controlling shareholder.

Commentary Steven Lofchie

While the process might have seemed straightforward at the time,
the issuer ultimately failed to make the transition from soft
drink manufacturer to blockchain technology firm.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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