Broker-Dealer Guilty of Insider Trading

Broker-Dealer Guilty of Insider Trading

A broker-dealer was sentenced on Friday to 36 months in prison for participating in a five-year insider trading scheme that relied on information stolen from an international law firm and yielded net profits of more than $5.6 million.

Vladimir Eyedelman, 44, formerly of Colts Neck, New Jersey, previously pleaded guilty to an information charging him with one count of conspiracy to commit securities and tender offer fraud, one count of securities fraud, and one count of tender offer fraud.

According to documents filed in this case and statements made in court:

From 2009 to 2013, Eydelman, a broker-dealer employed first by Oppenheimer & Co. and most recently by Morgan Stanley, repeatedly traded on material nonpublic information provided to him by his brokerage client, Frank Tamayo, 43, of Brooklyn, New York, who, in turn, had obtained the inside information from his friend and former law school classmate, Steven Metro, 42, of Katonah, New York. Metro was the managing clerk of the New York office of Simpson Thacher & Bartlett LLP, one of the nation’s premier mergers and acquisitions firms.

The inside information divulged by Metro to Tamayo and, in turn, by Tamayo to Eydelman, related to corporate transactions, such as mergers and acquisitions or tender offers, in which the law firm represented a party or financial advisor to the transaction. As the law firm’s managing clerk, a litigation-related function, Metro stole the inside information from the firm by scouring its computer system using search terms such as “merger agreement,” “bid letter,” “engagement letter,” “due diligence,” as well as client names and client-matter numbers.

After obtaining the information, Metro divulged it to Tamayo in person, usually meeting at a bar, coffee shop, or other location near their respective workplaces in midtown Manhattan. During such meetings, Metro provided Tamayo inside information pertaining to, among other things, the names and/or ticker symbols of the companies whose securities should be purchased, the general timing of the planned deals and information related to how the deals would affect the issuers’ stock price once announced. Tamayo generally would write the security’s ticker symbol on a small piece of paper or napkin and commit to memory any pricing or timing information provided by Metro.

After Tamayo received the inside information from Metro, Tamayo would meeet with Eydelman, usually at a location near Eydelman’s workplace, such as under the large clock in New York City’s Grand Central Terminal, where Tamayo would pass it on to Eydelman. Tamayo would show Eydelman the paper or napkin on which Tamayo had written the ticker symbol of the company whose securities should be purchased. After Eydelman memorized the ticker symbol, Tamayo then would place the paper or napkin into his mouth and chew until it was destroyed.

After receiving the inside information provided by Metro, whom Eydelman knew as Tamayo’s source at a law firm, Eydelman purchased securities for himself, family members, friends, and clients, including Tamayo. Eydelman quickly sold the shares and covered any positions once the relevant deal was publicly announced and the stock price rose.

Throughout the courst of the five-year scheme, Tamayo reinvested the approximately $7,000 in profits that Metro made on the first deal and updated Metro on the running balance of his profits from the inside trading scheme. As of October 2013, by which time the conspirators had traded ahead of at least 13 planned corporate transactions, Metro’s share of the profits had reached approximately $168,000, Metro sought to cash out his share of the accrued profits from the insider trading scheme, pressing Tamayo to “liberate some cash” during a meeting in January 2014. Eydelman paid approximately $7,000 in cash to Tamyao ins February 2014, with the expectation that Tamayo would use the cash to compensate Metro for providing them inside information.

By exploiting the information that Metro had stolen from the law firm, Eydelman and conspirators Metro and Tamayo netted more than $5.6 million in illicit profits.

In addition to the prison term, Judge Shipp sentenced Eydelman to three years of supervised release, fined him $15,000, and ordered him to forfeit $1,236,657.13.

Metro and Tamayo both pleaded guilty to their roles in the scheme. On Sept. 14, 2016, Metro was sentenced to 46 months in prison. On Sept. 21, 2015, Tamayo was sentenced to 12 months in prison.