Investment Banker and Plumber Charged with Insider Trading

The SEC charged an investment banker and his “close friend,” a plumber, with insider trading. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York (“SDNY”) announced criminal charges against the two men.

Specifically, the SEC alleged that:

  • the investment banker tipped his friend about “highly confidential” information concerning impending mergers and acquisitions (“M&A”) transactions;
  • the friend utilized this information to execute trades in advance of the announcement of at least ten M&A deals, from which he reaped approximately $76,000 in illegal profits;
  • in return for the tips, the friend made payments totaling thousands of dollars to the investment banker by handing the cash to the banker directly or placing it in his gym bag; and
  • in return for the tips, the friend also provided free services to the investment banker that involved bathroom remodeling.

The SEC asked the SDNY Court to enter a final judgment ordering the Defendants to (i) cease and desist, (ii) disgorge their ill-gotten gains with prejudgment interest, and (iii) pay civil penalties.

Lofchie Comment: At a time when the political discourse is focused on class division, this story of the banker and the plumber offers touching human interest. Imagine how nice it would be if, while the plumber was redoing the banker’s bathroom, the banker were renegotiating the plumber’s mortgage.