Management Firm Charged With Insider Trading

Management Firm Charged With Insider Trading

Trader At Large Canadian Asset Management Firm Charged With Insider Trading For Engaging In Multimillion-Dollar Front Running Scheme

Sean Wygovsky Stole Confidential Trade Information from His Employer to Place Hundreds of Timely, Profitable Trades in Years-Long Scheme

(STL.News) Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that SEAN WYGOVSKY, a trader at a large Canadian asset management firm (the “Employer Firm”), was charged in a Complaint in Manhattan federal court with securities fraud and wire fraud in connection with his scheme to steal confidential information about the trade orders of the Employer Firm in order to conduct hundreds of timely, profitable personal securities trades in the same stocks as the Employer Firm.

WYGOVSKY attempted to hide his conduct by trading or causing trading in brokerage accounts held in the names of his close relatives.  WYGOVSKY was arrested this morning in Austin, Texas, and is expected to be presented in federal court this afternoon before a U.S. Magistrate Judge for the Western District of Texas.

Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Sean Wygovsky illegally exploited his access to his employer firm’s yet-to-be-executed trade orders to make numerous trades in anticipation of the bump or dip the firm’s buying or selling would cause.  To conceal the scheme, Wygovsky allegedly made his front running trades through brokerage accounts of certain of his relatives.  As alleged, Wygovsky made or directed over 700 timely transactions that netted him more than $3.6 million in illegal profits.  Now Sean Wygovsky is in custody and facing serious criminal charges.”

FBI Assistant Director William F. Sweeney Jr. said: “Over the course of several years, as alleged, Wygovsky made hundreds of short-term trades based on inside information that ultimately reaped more than $3 million in profits.  Schemes like the one alleged here grossly affect the integrity of our financial markets and remain a top priority for our financial fraud investigative teams.”

As alleged in the Complaint unsealed today in Manhattan federal court:

SEAN WYGOVSKY has been employed at the Employer Firm since approximately 2013.  The Employer Firm is an asset management firm based in Toronto, Canada, with at least approximately $19 billion in assets under management.  WYGOVSKY has a number of close relatives who live in the United States, including a relative in North Carolina (“Relative-1”) and two relatives in Virginia (“Relative-2” and Relative-3”) who are married to each other.

The Front Running Scheme

Based on his position as a trader at the Employer Firm, WYGOVSKY had access to the trade information and trade orders of the Employer Firm.  Like most large asset managers, the Employer Firm had rules and regulations concerning employees’ personal trading, including requirements about the confidentiality of client information and prohibitions against insider trading and personal trading in the same securities as the Employer Firm.  The size of the Employer Firm’s trade orders often caused slight, temporary movements in the price of the securities traded.

For example, if the Employer Firm engaged in a large purchase of stock, the increased demand could cause a slight rise in the stock price, and if the Employer Firm engaged in a large sale of stock, the increased supply could cause a slight drop in the stock price.  Because WYGOVSKY had access to the Employer Firm’s trade orders, he knew in advance when a particular stock price would move slightly up or down based on that trading.

WYGOVSKY’s relatives maintained brokerage accounts for the personal purchase and sale of securities.  In particular, Relative-1 maintained at least one brokerage account and Relative-2 and Relative-3 maintained at least four brokerage accounts (the “Subject Accounts”).  From at least 2015 through April 2021, after obtaining information about the Employer Firm’s upcoming trading activity but before those trades were executed, WYGOVSKY caused the Subject Accounts to buy or sell the same securities the Employer Firm would be buying or selling, in order to profit through the subsequent movement of the stock that would often result from the Employer Firm’s trading.  WYGOVSKY would then cause the Subject Accounts to exit those positions once the Employer Firm’s trading was underway, often within hours of when the Subject Accounts had first entered the positions.

For example, if WYGOVSKY knew that the Employer Firm would be buying a particular stock, WYGOVSKY would cause one or more of the Subject Accounts to purchase that stock beforehand in relatively small amounts.  Then, as the Employer Firm made relatively large purchases, the stock price would increase and WYGOVSKY would cause the Subject Accounts to sell their holdings at a profit.

At times, WYGOVSKY personally conducted the trading on behalf of both the Employer Firm and the Subject Accounts.  For example, on occasion, IP log-ins from the Subject Accounts show the Subject Accounts were being accessed from locations where WYGOVSKY was travelling.  On other occasions, WYGOVSKY would cause others to execute the timely, profitable trading in the Subject Accounts.  Over an approximately five-year period, WYGOVSKY caused the Subject Accounts to engage in more than 700 such short-term timely, profitable trades, resulting in at least over $3.6 million of profits in the Subject Accounts.

Financial Transfers Back to Wygovsky

During the course of the front running scheme, Relative-2 and Relative-3 caused at least approximately hundreds of thousands of dollars to be sent back to WYGOVSKY from the Subject Accounts.  For example, between 2015 and 2020, Relative-2 and Relative-3 moved millions of dollars from the Subject Accounts to bank accounts that they controlled, and wrote checks to WYGOVSKY and his immediate family members for hundreds of thousands of dollars.  Furthermore, in or about late 2017 and early 2018, Relative-2 and Relative-3 transferred hundreds of thousands of dollars to a Slovenian bank for the benefit of certain relatives of WYGOVSKY’s wife.

* * *

WYGOVSKY, 40, of Ontario, Canada, is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the work of the FBI. Ms. Strauss further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action, for their cooperation and assistance in this investigation.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Daniel Tracer is in charge of the prosecution.

The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

SOURCE: USDOJ.Today

About Waqar Nawaz 3727 Articles
Waqar Nawaz has published content for STL.News for approximately three years. He is dedicated to publishing news released by the US Department of Justice. He actively monitors the web for fresh releases to help keep the public informed.