Traded on Information in Violation of Confidentiality Agreements, Netting More Than $3.9 Million During Three-Year Scheme
NEWARK, N.J. – A federal grand jury today indicted the owner and operator of a stock trading operation for his alleged participation in a multi-year insider trading scheme that netted more than $3.9 million in illicit profits, U.S. Attorney Paul J. Fishman announced.
Steven Fishoff, 58, of Westlake Village, California, is charged by indictment with one count of conspiracy to commit securities fraud and four counts of securities fraud.
According to documents filed in this case and statements made in court:
On numerous occasions, Fishoff and his conspirators obtained material nonpublic information related to publicly traded companies and traded on that information before it became public. Between June 2010 and July 2013, Fishoff or one of his traders – conspirators Ronald Chernin, 66, of Oak Park, California; Steven Costantin, 54, of Farmingdale, New Jersey, or a business associate referred to in the indictment as “Trader A”– expressed interest in participating in numerous stock offerings by publicly traded companies. Before providing confidential information to these individuals concerning the companies or the terms of the proposed sales, however, the investment bankers first required that Fishoff, Chernin, Costantin, Trader A, and their associated trading entities, agree to be “brought over the wall,” or “wall-crossed,” standard industry terms that meant they were required to keep the information confidential and could not buy or sell the stock based on the information.
Fishoff, Chernin, Costantin, or Trader A agreed to these disclosure and trading restrictions, then flagrantly breached the agreements. In many instances where Fishoff was not personally wall-crossed in an offering, Chernin, Costantin, and Trader A tipped Fishoff by telephone or by email about the offering prior to the public announcement. Even where Fishoff ostensibly was a party to the confidentiality agreement, through his affiliation with the wall-crossed trading entity, Fishoff breached the agreement by trading on the confidential information and by providing the information to his friends, Paul Petrello, 53, of Boca Raton, Florida, and a conspirator referred to in the indictment as “CC-1,” so that Petrello and CC-1 could engage in parallel trading through their own respective trading entities. There were also instances where Fishoff’s traders, Chernin or Costantin, violated the terms of the confidentiality agreements by using Fishoff trading entities to execute trades themselves before the offering. Fishoff and his conspirators shared the illicit profits from their insider trading scheme.
The conspiracy count with which Fishoff is charged carries a maximum potential penalty of five years in prison and a fine of $250,000. The securities fraud counts each carry a maximum potential penalty of 20 years in prison and a fine of $5 million.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Richard M. Frankel in Newark, for the investigation leading to today’s indictment. He also thanked the U.S. Securities and Exchange Commission’s Market Abuse Unit, under the direction of Robert Cohen and Joseph Sansone.
The government is represented by Assistant U.S. Attorney Shirley U. Emehelu of the Special Prosecutions Division and Assistant U.S. Attorney Nicholas P. Grippo of the Economic Crimes Unit of the U.S. Attorney’s Office in Newark, as well as Unit Chief Barbara Ward and Assistant U.S. Attorney Jafer Aftab of the Office’s Asset Forfeiture and Money Laundering Unit.
These charges are 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. attorney’s 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. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The charges and allegations contained in the indictment are merely accusations, and defendant is presumed innocent unless and until proven guilty.