Former Stock Broker Pleads Guilty in Manhattan Federal Court to Insider Trading Charges
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DARYL PAYTON, a former stock broker at a securities trading firm (“Securities Trading Firm-1”), pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The alleged scheme involved the misappropriation of material, non-public information (“Inside Information”) concerning IBM’s acquisition of a software company, SPSS, Inc., in 2009. PAYTON was charged in June 2012, and pled guilty today before U.S. District Judge Andrew L. Carter, Jr.
Manhattan U.S. Attorney Preet Bharara said: “With his guilty plea today, Daryl Payton must answer for his role in a scheme to acquire inside information about a corporate acquisition, and profit illegally from it to the tune of a quarter of a million dollars.”
According to the Indictment to which PAYTON pled guilty, statements made during the plea proceeding, and other court documents:
The Inside Information concerning IBM’s acquisition of SPSS originated from a corporate lawyer who was part of the legal team that represented IBM in the transaction (“Attorney-1”) in 2009. On or about May 31, 2009, Attorney-1 shared Inside Information concerning the transaction, including the names of the parties and the fact that IBM was going to acquire SPSS for a significant premium over its market price, with his close friend, Trent Martin, a former research analyst at an international financial services firm. The information was shared in confidence and, based on their longstanding history of sharing confidences, Attorney-1 expected that Martin would not share the information or use it to trade.
However, in June and July 2009, Martin bought SPSS common stock and call option contracts based on the Inside Information he was given by Attorney-1 and, in turn, shared the tip with his roommate, Thomas Conradt, who worked as a stock broker at Securities Trading Firm-1. In July 2009, Conradt bought SPSS common stock and tipped PAYTON, his co-worker at Securities Trading Firm-1 who also bought SPSS call options, as well as other co-workers at the firm. When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41% in one day. Thereafter, PAYTON sold his SPSS positions, yielding total profits of at least $250,000.
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PAYTON, 38, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. He is scheduled to be sentenced by Judge Carter on March 5, 2015, at 2:00 p.m. The maximum potential sentence 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 investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission.
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. Attorneys Jessica Masella, Andrew Bauer, and Damian Williams are in charge of the prosecution.