The owner and operator of a stock trading operation today admitted participating in a multi-year insider trading scheme that made over $3 million in illicit profits by exploiting material information in violation of confidentiality agreements, U.S.
Attorney Craig Carpenito announced, Steven Fishoff, 60, of Westlake Village, California, pleaded guilty before U.S. District Judge Michael A. Shipp in Trenton federal court to Count Four of an indictment charging him with securities fraud.
According to documents filed in this case and statements made in court:
On numerous occasions between May 2010 and August 2013, Fishoff, Ronald Chernin, 69, of California, Steven Costantin, 57, of Farmingdale, NJ, Paul Petrello, 56, of Boca Raton, Florida, and Joseph Spera, 56, of Boca Raton, short-sold the securities of numerous public companies using inside information obtained by Fishoff and others.
For each of these offerings, Fishoff or one or more of the day traders that he employed – including his friend, Chernin, and his brother-in-law, Costantin – entered into confidentiality or “wall-crossing” agreements as representatives of Fishoff’s trading entities, whereby they agreed not to disclose or trade on inside information concerning the offerings, such as the name of the issuers and the timing and pricing of the transactions, and were “brought over the wall” for the narrow purpose of determining whether to purchase the offered securities.
In breach of these confidentiality and trading restrictions, Fishoff tipped Petrello and Spera – identified as “CC-1” in the indictment – with the inside information about the confidentially marketed offerings, including the stock trading symbols of the companies and the timing or pricing of the upcoming offerings.
In furtherance of the scheme, Fishoff short sold the stock of the public companies, including Synergy Pharmaceuticals Inc., based on the inside information, in anticipation of a drop in the stocks’ price when the stock offerings were disclosed to the public. Fishoff and his co-defendants traded through the accounts of their respective trading entities or through related accounts that they controlled.
Fishoff and his co-defendants used the inside information to gain more than $3 million in illegal profits over the course of the three-year scheme. Chernin and Costantin, who executed trades using Fishoff’s capital, along with Petrello and Spera, generally split their profits with Fishoff on a 50-50 basis as compensation for the inside information.
Fishoff faces a maximum potential penalty of 20 years in prison and a $5 million fine on the securities fraud charge. Fishoff also agreed to settle the parallel civil forfeiture action, United States of America v. The Contents of Wedbush Securities Account Number 8313 et al., and to forfeit the over $1.6 million in assets sought by the government in that complaint.
Sentencing is scheduled for June 20, 2018.
Officials said Chernin, Costantin, Petrello, and Spera have all pleaded guilty for their involvement in the scheme and await sentencing.