It’s like the cast of a new “Ocean’s Eleven” film: a London investment banking couple who called each other “Pops” and “Popsy”, a Greek owner of a chain of Manhattan restaurants, a poker-playing securities trader in Monaco, a Goldman Sachs vice-president and the son of a pharmaceuticals company board member.
They’re all accused of participating in a “wide-ranging international insider trading ring”. US prosecutors unveiled the charges in the past week, piggy-backing on similar actions taken in France and the UK in recent years. Taken together, it’s a dramatic assault on a network of bankers and traders operating on both sides of the Atlantic who allegedly reaped tens of millions of dollars in illicit profits.
And yet more is likely to come. It’s unclear from the US complaints who, if anyone, is the mastermind behind the scheme. One trader in Switzerland, who hasn’t been charged, appears in multiple indictments, but isn’t identified.
While the profits were allegedly big and the scheme expansive, the basics were relatively simple.
Investment bankers got information about pending mergers and acquisitions at work, according to the US Justice Department and the Securities and Exchange Commission (SEC). They then sold the information to middlemen, who passed it on to traders. The bankers were repaid with cash, expensive holidays, luxury watches and other benefits, according to court filings.
The ring had access to dozens of insider tips and used in-person meetings and “burner” cell phones to avoid detection. To further cover their tracks, the insiders traded using derivatives that are illegal in the US and hard to track by regulators.
For example, the group traded in shares of Onyx Pharmaceuticals and Omnicare – among more than a dozen other companies – using so-called contracts for difference (CFDs), which allow investors to make big bets with just a small down payment.
At the same time, members of the ring tipped off financial news organisations, including Bloomberg News, hoping to benefit from a pop in the stock price when reporters independently corroborated the information and published the news.
Among the “Ocean’s Eleven” crew is George Nikas, a Greek who remains at large in his home country. He allegedly placed most of his trades using CFDs.
The 54-year-old has businesses in Europe and the US, including GRK Fresh, a New York chain of Greek fast-food restaurants. Prosecutors say he got information from Bryan Cohen, a Goldman Sachs vice-president in New York. While at one of Mr Nikas’s restaurants, Mr Cohen, 33, would get information about pending takeovers by using his burner phones and would then tell Mr Nikas about deals like one tied to Buffalo Wild Wings, according to prosecutors. Mr Cohen pleaded not guilty in a Manhattan court on Tuesday.
Mr Nikas allegedly had another source of intel: Telemaque Lavidas, 38, a fellow Greek, whose father was on the board of Ariad Pharmaceuticals. From his father, Mr Lavidas picked up tips about Ariad having to halt clinical trials or being in talks to sell and fed them to Mr Nikas, who made millions of dollars trading on the information, prosecutors say. Mr Lavidas was arrested in New York and has asked to be freed on bail, claiming his role in the conspiracy was “relatively small”.
Pops and Popsy
The poker-playing securities trader, Joseph El-Khouri, 52, was arrested by police in the UK on Monday. Mr El-Khouri allegedly traded on inside information obtained from the two London bankers: Benjamin Taylor, 35, who worked at Moelis & Co and Darina Windsor, 32, who was at Centerview Partners.
For a while the two bankers shared an apartment in London, were romantically involved and called each other Pops and Popsy in messages. For example, in October 2012 Ms Windsor sent an email to Mr Taylor titled “Once upon a time, there was a Pops searching for Truffles in the Forest...”, according to the indictment. Confidential information was allegedly attached to the email.
They were paid at least $1m (£778,000) in cash and other benefits, according to the prosecutors. Now, Mr Taylor is in France and Ms Windsor is in her native Thailand, prosecutors said.
Mr El-Khouri received tips from Mr Taylor and Ms Windsor through a friend and sent gifts back in return, knowing they would be given to the couple, prosecutors said.
Mr Taylor passed price-sensitive information for 16 transactions related to US stocks that he and Ms Windsor got at work, which was passed on to a network of traders in Switzerland and London, prosecutors said.
In one January 2013 deal, Mr Taylor accessed confidential merger details regarding Life Technologies, even though he wasn’t assigned to the project. Mr Taylor passed those documents to an unnamed trader who then either directly or indirectly sent them to a reporter at a Canadian newspaper, the SEC said. Days later, the outlet published that Life Technologies was exploring a sale, sending its shares soaring.
Mr Lavidas’s lawyer Reed Smith points out in his bail request that the statute of limitations may have run out on some of the crimes. The statute of limitations for wire fraud is five years, unless it affects a financial institution – then it’s 10 years.
“Two of the nine counts against Mr Lavidas are likely time-barred as they are for wire fraud activities that allegedly occurred in 2013,” Mr Smith wrote.
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