Insider Trading: A Billionaire and His Friends
It is tempting to think of crimes such as insider trading as being wrongful conduct engaged in by those who want to make a quick, easy and seemingly painless dollar. In many cases is it just that – what many see as a victimless crime. But it is not so. It is not victimless, and it is not harmless as those engaged in the securities business well know. It pollutes the markets and injures every trader in them.
The Commission’s most recent case in this area is a good example of how this type of wrongful conduct in some instances is occurs. Named as one of the defendants is Joseph C. Lewis, a British billionaire who owns the Tottenham Hotspur English Soccer Club. A parallel criminal indictment claims that Mr. Lewis distributed inside information to his friends periodically, apparently a kind of perk. SEC v. Lewis, Civil Action No. 1:23-cv-06438 (Filed July 26, 2023).
Named as defendants are: Joseph C. Lewis; Carolyn W. Carter, Mr. Carter’s romantic interest; Patrick J. O Connor, one of his private jet pilots; and Bryan L. Waugh, another private jet pilot who works for Mr. Lewis.
The case centers on Mr. Lewis distributing inside information to each named defendant with the expectation that each person would trade and profit. Each did trade. The combined trading profits were $545,000.
Mr. Lewis has served as a senior officer with The Fund for years. The Fund traded in biotechnology companies. The Officer has served as a senior official of the Fund since 2015. That Officer often entrusted inside information to Mr. Lewis. The Officer knew that the Fund had a substantial investment in Issuer A. He also learned that the Issuer would be raising capital through a PIPE offering. That type of transaction tends to raise the share price.
Between July and October 2019 Mr. Lewis furnished inside information obtained from the Officer to Ms. Carter. Specifically, within three hours of a meeting with Mr. Lewis, Ms. Carter purchased over $700,000 of Issuer A’s common stock. Following the announcement the next day about the capital raise, the firm’s share price increased over 34%. Ms. Carter had profits of over $172,000.
In September 2019, while staying aboard Mr. Lewis’ yacht, the Officer learned of positive results from a clinical trial related to a cancer drug being developed by Issuer B. The Officer also learned that the results might be presented at the end of October 2019 at a conference. The Officer told Mr. Lewis of the information.
Subsequently, Mr. Lewis furnished the information to Ms. Carter and later to Defendants O’Connor and Waugh. Each traded. Collectively they purchased over $3 million of Issuer B’s stock. Messrs. O’Connor and Waugh used the proceeds of a $500,000 loan extended by Mr. Lewis to execute the trades. The day of the announcement Issuer B’s share price increased over 16%. The three traders had profits of over $373,000. The complaint alleges violations of Exchange Act Section 10(b). The U.S. Attorney’s Office for the Southern District of New York announced the filing of parallel criminal charges.
Insider Trading: A Billionaire and His Friends
It is tempting to think of crimes such as insider trading as being wrongful conduct engaged in by those who want to make a quick, easy and seemingly painless dollar. In many cases is it just that – what many see as a victimless crime. But it is not so. It is not victimless, and it is not harmless as those engaged in the securities business well know. It pollutes the markets and injures every trader in them.
The Commission’s most recent case in this area is a good example of how this type of wrongful conduct in some instances is occurs. Named as one of the defendants is Joseph C. Lewis, a British billionaire who owns the Tottenham Hotspur English Soccer Club. A parallel criminal indictment claims that Mr. Lewis distributed inside information to his friends periodically, apparently a kind of perk. SEC v. Lewis, Civil Action No. 1:23-cv-06438 (Filed July 26, 2023).
Named as defendants are: Joseph C. Lewis; Carolyn W. Carter, Mr. Carter’s romantic interest; Patrick J. O Connor, one of his private jet pilots; and Bryan L. Waugh, another private jet pilot who works for Mr. Lewis.
The case centers on Mr. Lewis distributing inside information to each named defendant with the expectation that each person would trade and profit. Each did trade. The combined trading profits were $545,000.
Mr. Lewis has served as a senior officer with The Fund for years. The Fund traded in biotechnology companies. The Officer has served as a senior official of the Fund since 2015. That Officer often entrusted inside information to Mr. Lewis. The Officer knew that the Fund had a substantial investment in Issuer A. He also learned that the Issuer would be raising capital through a PIPE offering. That type of transaction tends to raise the share price.
Between July and October 2019 Mr. Lewis furnished inside information obtained from the Officer to Ms. Carter. Specifically, within three hours of a meeting with Mr. Lewis, Ms. Carter purchased over $700,000 of Issuer A’s common stock. Following the announcement the next day about the capital raise, the firm’s share price increased over 34%. Ms. Carter had profits of over $172,000.
In September 2019, while staying aboard Mr. Lewis’ yacht, the Officer learned of positive results from a clinical trial related to a cancer drug being developed by Issuer B. The Officer also learned that the results might be presented at the end of October 2019 at a conference. The Officer told Mr. Lewis of the information.
Subsequently, Mr. Lewis furnished the information to Ms. Carter and later to Defendants O’Connor and Waugh. Each traded. Collectively they purchased over $3 million of Issuer B’s stock. Messrs. O’Connor and Waugh used the proceeds of a $500,000 loan extended by Mr. Lewis to execute the trades. The day of the announcement Issuer B’s share price increased over 16%. The three traders had profits of over $373,000. The complaint alleges violations of Exchange Act Section 10(b). The U.S. Attorney’s Office for the Southern District of New York announced the filing of parallel criminal charges.