Former High-Level Adviser to Bank CEO Charged in Manhattan Federal Court with Insider Trading
PREET BHARARA, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the indictment of CEDRIC CAÑAS MAILLARD, a former high-level adviser to the CEO of a global bank, who engaged in securities trades based on material, nonpublic information he obtained through his employment. CAÑAS’s trades resulted in profits of approximately $917,239.
U.S. Attorney Preet Bharara said: “As alleged, Cedric Cañas exploited his access to material nonpublic information to purchase securities he reasonably knew would increase in value after a public announcement. In short order, he allegedly sold the securities for a nearly $1 million profit. Working with the FBI, we will continue to prosecute those who seek to reap illegal windfall profits from insider information.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Cañas allegedly based his purchase of Potash equities on illegally obtained inside information, which provided him with nearly $1 million in profits when all was said and done. His actions detail the existence of disingenuous trading principles that effectively thwart fairness in the marketplace. Today we remind the public that the FBI and our partners will continue to work to restore and uphold the integrity of our financial markets.”
According to the two-count Indictment unsealed today in Manhattan federal court:
In August 2010, CAÑAS engaged in a series of trades based on material, nonpublic information he obtained during the course of his employment. Prior to engaging in these trades, CAÑAS, who was employed at a global bank (the “Bank”) as a high-level adviser to the chief executive officer of the Bank, obtained confidential information related to the planned acquisition of Potash Corporation of Saskatchewan Inc. (“Potash”) by BHP Billiton (“BHP”) for $45 billion.
After receiving this information, and prior to the public announcement of the planned acquisition, CAÑAS, who worked for the Bank in Spain, purchased 30,000 Potash equity Contracts for Difference (“CFDs”), which are a form of highly leveraged securities, for which he paid a total of $1,500 in commission fees. Upon receiving CAÑAS’s CFD purchase orders, CAÑAS’s broker purchased an equivalent number of New York Stock Exchange-listed Potash shares. CAÑAS’s purchase of Potash CFDs violated the Bank’s Code of Conduct, which CAÑAS was aware of and understood. The Code of Conduct prohibited trading based upon inside information such as BHP’s planned acquisition of Potash.
On August 16, 2010, the closing price of Potash’s stock on the New York Stock Exchange was $112.15. On August 17, 2010, it was publicly announced that the board of Potash had received and rejected an unsolicited offer from BHP to purchase the common stock of Potash for $38.6 billion, or the equivalent of $130 per share. The price of Potash stock rose and ultimately closed on August 17, 2010, at $143.17 per share. CAÑAS liquidated his position in Potash equity CFDs on the same day as the public announcement, resulting in profits of approximately $917,239.
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CAÑAS, 41, a Spanish citizen, has not been arrested.
CAÑAS is charged with two counts of securities fraud. Each count carries a maximum of 20 years in prison and a maximum fine of $5,000,000. 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.
Mr. Bharara praised the work of the FBI, and thanked the SEC for its assistance. He added that the investigation is continuing.
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’s 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. Attorney Edward Y. Kim is in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.