Home San Diego Press Releases 2010 Participants in Insider Trading Scheme Plead Guilty to Conspiracy to Commit Securities Fraud

Participants in Insider Trading Scheme Plead Guilty to Conspiracy to Commit Securities Fraud

U.S. Attorney’s Office December 08, 2010
  • Southern District of California (619) 557-5610

SAN DIEGO, CA—David V. Myers, of Cleveland, Ohio, and his nephew, Brett A. Cohen, of Baltimore, Maryland, entered guilty pleas today based on their insider trading activity in stock options of Sequenom, Inc. (Nasdaq: SQNM), a publicly-traded biotechnology company headquartered in San Diego, California, announced United States Attorney for the Southern District of California Laura E. Duffy. Myers and Cohen each pled guilty to a single count of conspiracy to commit securities fraud before United States Magistrate Judge Ruben B. Brooks. Their guilty pleas are subject to final acceptance by United States District Court Judge Barry Ted Moskowitz when they appear for sentencing on February 18, 2011.

According to court documents and admissions during the plea hearing, Cohen received material nonpublic information from a college friend concerning two biotechnology companies and forwarded the tips to his uncle (Myers) for the purpose of purchasing securities in those companies.

Using the inside information from Cohen, Myers bought stock and stock options that he later sold for a gross profit of over $600,000. Cohen received the first tip in or about October 2008, which he knew came from his college friend's brother at a biotechnology company in San Diego. The college friend communicated with Cohen about this stock tip by telephone and e-mail and even used an e-mail with a coded reference to the insider trading activity depicted in the motion picture "Wall Street."

Myers used this stock tip to purchase approximately $20,000 worth of stock in the biotechnology company that two months later, in January 2009, became the subject of an acquisition offer from Sequenom. Myers later had Cohen deliver approximately $4,000 in cash to his college friend in exchange for this inside information.

In addition, according to court documents and admissions during today's plea hearing, on April 29, 2009, with approximately 30 minutes remaining in the trading day, Cohen received an urgent phone call from his college friend. The college friend told Cohen that his brother in San Diego had another stock tip, this time about Sequenom. The college friend related to Cohen that very bad things were happening quickly at Sequenom. Knowing that he had received material nonpublic information about Sequenom, Cohen immediately called Myers and related this information. Within minutes and just before the close of trading, Myers used this information to purchase approximately $40,000 worth of "put options" that would increase in value if Sequenom's share price declined. After the close of trading on April 29, 2009, Sequenom issued a press release announcing a delay in its testing and launching of a novel prenatal diagnostic test that the company had previously touted to investors and analysts. Sequenom contended that "employee mishandling of R&D test data and results" rendered the previously-released results unreliable and announced that the company was opening an internal investigation. Investors and analysts reacted negatively to this information, and by the close of trading on April 30, 2009, Sequenom's stock price had declined more than 70 percent from the previous day's close, and trading volume increased more than 600 percent.

Myers sold the Sequenom stock options on April 30, realizing approximately $612,000 in gross proceeds. Myers later delivered approximately $10,000 in cash to Cohen's college friend in exchange for the valuable inside information related to him through Cohen.

The criminal case is being prosecuted in San Diego federal court by Assistant United States Attorneys Eric Beste and Steven Stone and is the result of an investigation by the Federal Bureau of Investigation, San Diego Division. The criminal investigation into these matters continues.

The U.S. Attorney's Office and the FBI coordinated their efforts with the United States Securities and Exchange Commission, Division of Enforcement, which is pursuing a parallel civil action against Myers and Cohen.

These criminal and civil cases were brought in coordination with the interagency Financial Fraud Enforcement Task Force, which was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. For more information on the task force, visit www.StopFraud.gov.