Former Hedge Fund Analyst Pleads Guilty in Manhattan Federal Court to Insider Trading Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, announced that Matthew Teeple, a former analyst for a hedge fund investment adviser located in San Francisco, California (Investment Adviser A), pled guilty today to participating in an insider trading scheme that resulted in at least $27 million in ill-gotten gains and losses avoided. Specifically, Teeple admitted that in 2008, he received and passed on to Investment Adviser A illegally obtained inside information about Foundry Networks Inc. (Foundry), a technology company located in Santa Clara, California. This inside information included the fact—before it became public on July 21, 2008—that Brocade Communications Inc. (Brocade) was planning to acquire Foundry. Teeple pled guilty today before the Honorable James C. Francis, IV, United States Magistrate Judge.
Manhattan U.S. Attorney Preet Bharara said, “Matthew Teeple admitted that he received inside information from a tech company insider and passed it on to others, who reaped a windfall of at least $27 million. Teeple, the 85th defendant to be convicted of insider trading by plea or trial in this district since 2009, has earned himself a likely prison term.”
According to the agreement pursuant to which Teeple entered his plea of guilty today, the underlying criminal complaint filed March 26, 2013, the superseding indictment filed February 20, 2014, and statements made during court proceedings:
Teeple obtained material, non-public information relating to Foundry, including information relating to monthly and quarterly financial reporting, well before such information became public. More specifically, the inside information that Teeple received from an insider at Foundry included quarterly financial performance numbers during the first quarter of 2008, information regarding Brocade’s intended acquisition of Foundry in July 2008, and information about developments regarding the Brocade-Foundry transaction in October 2008.
Teeple passed the inside information to others, including another analyst at Investment Adviser A. Using the inside information Teeple provided about Foundry, Investment Adviser A reaped gains and avoided losses of at least $27 million in 2008.
Others Teeple tipped with the inside information included two acquaintances of his, John Johnson and Karl Motey. Regarding Brocade’s 2008 acquisition of Foundry, Teeple told both Johnson and Motey not only that Foundry was going to be acquired by Brocade but also the approximate acquisition price, which turned out to be substantially accurate. Johnson traded on this information and profited in excess of $136,000. On March 18, 2013, he pled guilty to conspiracy and securities fraud charges before United States District Judge John F. Keenan.
Teeple, 42, of San Clemente, California, pled guilty to count one of a four-count superseding indictment. Count one charges a conspiracy to commit insider trading and carries a maximum term of five years in prison. As part of his guilty plea, Teeple agreed to forfeit $553,890 and further agreed not to seek a term of imprisonment other than the statutory maximum term of five years. Teeple is scheduled to be sentenced by the Honorable Robert P. Patterson on September 26, 2014, at 10:00 a.m. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Teeple’s co-defendant, David Riley, is scheduled to proceed to trial before Judge Patterson on July 7, 2014.
Mr. Bharara praised the investigative work of the FBI and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions; and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Telemachus P. Kasulis and Sarah E. McCallum and Special Assistant U.S. Attorney Michael P. Holland are in charge of the prosecution.