FORMER INVESTMENT ADVISER SENTENCED IN MANHATTAN FEDERAL COURT TO 26 MONTHS IN PRISON FOR INSIDER TRADING SCHEME

United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE CONTACT: U.S. ATTORNEY’S OFFICE
MAY 24, 2011 ELLEN DAVIS,

PREET BHARARA, the United States Attorney for the
Southern District of New York, announced that ALEXEI P. KOVAL,
a/k/a “Aleksey Koval,” was sentenced today in Manhattan federal
court to 26 months in prison for his participation in an insider
trading scheme. KOVAL, a registered investment adviser, traded
on inside information he received from his co-conspirator, IGOR
POTEROBA, a former investment banker in the Healthcare Group of
UBS Securities LLC (“UBS”). The trading, which was based on
information related to six mergers and acquisitions that certain
UBS clients were contemplating, generated hundreds of thousands
of dollars in illicit profits. KOVAL, 37, previously pled guilty
to three counts of securities fraud and one count of conspiracy
to commit securities fraud on January 7, 2011. U.S. District
Judge PAUL A. CROTTY imposed today’s sentence.
Manhattan U.S. Attorney PREET BHARARA said: “Alexei
Koval flagrantly and repeatedly traded on inside information and
was only too happy to share his illicit profits with his partner
in crime and tipster. Their scheme has now come to a just
conclusion.”
According to documents previously filed in Manhattan
federal court:
From May 2006 through at least 2009, KOVAL was a
registered investment adviser. During approximately the same
time period, POTEROBA served as an Executive Director at UBS. In
that capacity, he obtained material, non-public information (the
“UBS Inside Information”) regarding certain mergers and
acquisitions involving the following six publicly traded
healthcare companies: Guilford Pharmaceuticals, Inc., Molecular
Devices Corporations, PharmaNet Development Group, Inc., Via
Cell, Inc., Millennium Pharmaceuticals, Inc., and Indevus
Pharmaceuticals, Inc. (collectively, the “Healthcare Companies”).
In violation of his duties of trust and confidence, POTEROBA then
disclosed the UBS Inside Information to KOVAL, who traded on the
information, and disclosed it to another co-conspirator (“CC-1”).
As part of the scheme, KOVAL typically received tips
from POTEROBA by telephone in advance of a public announcement
about certain mergers and acquisitions. Shortly after receiving
a tip from POTEROBA, he and CC-1 purchased securities in one of
the Healthcare Companies. Following the public announcement of
the acquisition, KOVAL and CC-1 quickly sold the securities they
had purchased. They executed dozens of securities transactions
based on UBS Inside Information provided by POTEROBA. KOVAL then
paid a portion of the profits to POTEROBA.
* * *
In addition to his prison term, Judge CROTTY sentenced
KOVAL, of Chicago, Illinois, and Pasadena, California, to two
years of supervised release and ordered him to forfeit
$1,414,290, representing the amount of proceeds obtained as a
result of the securities fraud offenses charged in the
Indictment.
KOVAL’s co-conspirator IGOR POTEROBA, 37, of Darien,
Connecticut, pled guilty to similar charges before Judge CROTTY
on December 21, 2010, and was sentenced to 22 months’
imprisonment on March 21, 2011.
Mr. BHARARA praised the investigative work of the
Federal Bureau of Investigation. He also thanked the U.S.
Securities and Exchange Commission for its assistance in the
investigation.
This case was brought in coordination with President
BARACK OBAMA’s Financial Fraud Enforcement Task Force, on which
Mr. BHARARA serves as a Co-Chair of the Securities and
Commodities Fraud Working Group. President OBAMA established the
interagency Financial Fraud Enforcement Task Force to wage an
aggressive, coordinated, and proactive effort to investigate and
prosecute financial crimes. The task force includes
representatives from a broad range of federal agencies,
regulatory authorities, inspectors general, and state and local
law enforcement who, working together, bring to bear a powerful
array of criminal and civil enforcement resources. The task
force is working to improve efforts across the federal executive
branch, and with state and local partners, to investigate and
prosecute significant financial crimes, ensure just and effective
punishment for those who perpetrate financial crimes, combat
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discrimination in the lending and financial markets, and recover
proceeds for victims of financial crimes.
This case is being handled by the Office’s Securities
and Commodities Fraud Task Force. Assistant U.S. Attorney
MARISSA MOLÉ is in charge of the prosecution.
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