Six Members Of Global Insider Trading Ring Charged In Manhattan Federal Court

Audrey Strauss, Attorney for the United States acting under authority conferred by 28 U.S.C. § 515, 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 the unsealing of four indictments and the arrests of three members of a wide-ranging international insider trading ring.  BRYAN COHEN, an investment banker based in New York, and TELEMAQUE LAVIDAS, the son of a member of the board of directors of Ariad Pharmaceuticals, Inc. (“Ariad”), which, until 2017, was a Boston-based publicly traded company, were both arrested on Friday in Manhattan.  JOSEPH EL-KHOURI, a securities trader, was arrested yesterday in the United Kingdom, and the United States Government will be seeking his extradition to the United States.  BENJAMIN TAYLOR and DARINA WINDSOR, former investment bankers who worked in London, as well as GEORGIOS NIKAS, a securities trader who also owns various business interests in Europe and the United States, including a chain of Greek restaurants in New York, remain at large.

Deputy U.S. Attorney Audrey Strauss said:  “The insider trading charges announced today lay bare a long-running international scheme stretching over the course of years, whose participants earned tens of millions of dollars in illicit profits from illegally trading on stolen inside information.  Our Office, along with our law enforcement partners, will vigorously prosecute those who steal such information and the traders who profit off of it.”   

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, the indictments announced today detail very deliberate activity by both current and former investment bankers, securities traders, and even the son of a corporate board member to illegally profit from receiving or providing advanced knowledge of nonpublic information about publicly traded companies.  When one has access to material, nonpublic information, they’re afforded significant knowledge that could give them a competitive edge in stock and options trading.  Exploiting this knowledge is illegal, and the FBI will continue to investigate and prosecute those who cheat the system in this way.” 

As alleged in the Indictments unsealed in Manhattan federal court:[1]

The defendants charged were members of a global insider trading ring.  As part of the ring’s illicit conduct, insiders at multiple investment banks obtained material, nonpublic information (“MNPI”) about publicly traded companies and provided that information, sometimes through middlemen, to securities traders who paid for that information in order to place timely, profitable securities trades based on that MNPI.  Members of this ring took steps to evade detection by law enforcement, including by using unregistered “burner” cellphones and encrypted applications to communicate.  In total, the stolen MNPI was used by securities traders to earn tens of millions of dollars in illegal profits.  The charges announced today include charges against investment banking insiders, a close relative of a corporate insider, as well as securities traders who traded on the MNPI.

Investment Bankers Benjamin Taylor and Darina Windsor

Between 2012 and 2016, BENJAMIN TAYLOR and DARINA WINDSOR were investment bankers working in the London offices of two global investment banking advisory firms (“Investment Bank A” and “Investment Bank B,” respectively).  By virtue of their employment at those firms, they had access to MNPI relating to corporate transactions involving clients of Investment Bank A and Investment Bank B, and were able to access computer files relating both to transactions to which they were assigned, and those to which they were not assigned.  Both TAYLOR and WINDSOR were required to keep that MNPI strictly confidential, and they regularly attested that they were complying with their employers’ policies prohibiting insider trading.

Notwithstanding those attestations, TAYLOR and WINDSOR violated their duties of trust and confidence by stealing MNPI from their investment bank employers relating to numerous corporate transactions.  Specifically, TAYLOR stole information from Investment Bank A and sold it to middlemen, and WINDSOR stole information from Investment Bank B and provided it to TAYLOR, who sold it to the same middlemen.  TAYLOR and WINDSOR knew that the MNPI they had stolen would be sold to securities traders, who would be able to execute profitable securities transactions in advance of the MNPI becoming public.  TAYLOR and WINDSOR received from the middlemen over $1 million of benefits, including cash, expensive trips, and luxury watches, for the MNPI they provided. 

In total, TAYLOR and WINDSOR provided the middlemen with information about approximately 16 different corporate transactions, all relating to companies whose securities were listed on United States exchanges.  The MNPI that TAYLOR and WINDSOR stole, and then sold, yielded tens of millions of dollars of illicit profits, including by securities traders residing in Switzerland and the United Kingdom.

TAYLOR, who passed the MNPI to the middlemen, used encrypted messaging applications and unregistered “burner” cellphones to communicate with other members of the scheme and arrange in-person meetings to discuss their scheme.  One of the securities traders who received the MNPI that TAYLOR and WINDSOR stole occasionally purchased the relevant securities and then provided the MNPI to journalists for the purpose of causing them to write news stories relating to the MNPI that could influence a company’s stock price.

The indictment charging TAYLOR and WINDSOR has been assigned to United States District Judge Vernon S. Broderick.

Investment Banker Bryan Cohen

COHEN is an investment banker working in the investment banking division of a global investment banking advisory firm (“Investment Bank C”).  By virtue of his employment at Investment Bank C, COHEN had access to MNPI relating to corporate transactions, and was under duties and obligations to keep that MNPI strictly confidential.  COHEN previously worked in the London office of Investment Bank C, and later transferred to its New York office.   

Notwithstanding his duties to keep the MNPI confidential, between 2015 and 2017, COHEN stole MNPI from Investment Bank C and passed it to a European securities trader in order to trade based on the MNPI.  COHEN informed the securities trader both about corporate acquisitions as well as updates about how the deals were progressing over time.  Some of the inside information that COHEN provided related to companies whose securities were listed on United States exchanges.  The information that COHEN provided ultimately resulted in substantial profits for the traders who received it and traded based on it.  In exchange for providing MNPI he stole from Investment Bank C, COHEN received benefits, including cash, from the securities trader.

COHEN took steps to conceal his scheme, including communicating through “burner” cellphones and receiving cash in person and through intermediaries.

The indictment charging COHEN has been assigned to United States District Judge William H. Pauley III.

Securities Trader Joseph El-Khouri

EL-KHOURI is a securities trader who resides in London, England.  Between February and October 2015, he provided cash, gifts, and other benefits, including travel and expensive hotel stays, to a middleman, in exchange for obtaining MNPI about corporate transactions that had been stolen by TAYLOR and WINDSOR and provided to the middleman in exchange for cash and gifts, part of which were used to compensate TAYLOR and WINDSOR for providing that information.  In total, EL-KHOURI placed trades in the stocks of at least six companies based on the MNPI and prior to the companies announcing their acquisitions to the public, and generated nearly $2 million in illicit profits from those trades.

EL-KHOURI and the middleman regularly communicated both in person and by phone about their scheme, including by using encrypted messaging applications and “burner” phones that they destroyed and replaced on a regular basis, in order to avoid detection by law enforcement. 

The indictment charging EL-KHOURI has been assigned to United States District Judge John G. Koeltl.

Securities Trader Georgios Nikas and Telemaque Lavidas

NIKAS’s Trading Based on MNPI Stolen from Investment Banks

NIKAS is a securities trader who also owns various business interests in Europe and the United States, including a chain of Greek restaurants in New York.  NIKAS received MNPI concerning acquisitions and potential acquisitions of publicly traded companies from another securities trader in the scheme.  NIKAS knew that the MNPI was obtained from insiders at investment banks who breached their duties in stealing and passing on the information.

NIKAS began trading with the other securities trader based on MNPI that had been collected from investment banking insiders in 2010.  From December 2012 through 2017, they obtained MNPI from TAYLOR, WINDSOR, and COHEN, all of whom had stolen the MNPI from their respective investment banks.  NIKAS then executed securities trades, both in his own name and in a purported hedge fund that he and the other securities trader used to trade based on the stolen MNPI.  NIKAS ultimately placed trades in the securities of at least 12 companies, which were listed on United States exchanges, based on stolen MNPI, and reaped millions of dollars in profits.

NIKAS and others involved in the scheme also took numerous steps to conceal their activity, including using multiple “burner” cellphones to communicate with each other.  COHEN even picked up the “burner” cellphones that he used to communicate with other members of the scheme from a restaurant owned and operated by NIKAS in New York.

NIKAS’s Trading Based on MNPI Obtained from Lavidas and Stolen from Ariad

NIKAS also obtained MNPI concerning Ariad from LAVIDAS, the relative of a corporate insider.  NIKAS and LAVIDAS together engaged in a scheme, beginning in 2013, to steal confidential inside information from Ariad, a biotechnology company headquartered in Boston that was marketing Iclusig, a drug for treatment of leukemia, for their personal use.  NIKAS and LAVIDAS were friends, and NIKAS also had a personal relationship with a member of the board of directors of Ariad (“Director-1”), who was LAVIDAS’s father.  LAVIDAS used his connection to Director-1 to obtain MNPI about Ariad and then provided that information to NIKAS, who reaped millions of dollars in profits by trading based on that MNPI.  NIKAS also provided the MNPI to another securities trader in the scheme, who also reaped substantial profits by trading on the information.  During the course of the conspiracy, NIKAS paid LAVIDAS in exchange for the MNPI.

Specifically, on four separate occasions from 2013 through 2015, Director-1 became aware of MNPI relating to Ariad, and disclosed that information to LAVIDAS, who in turn disclosed it to NIKAS so that NIKAS could trade on it.  Those four occasions included an announcement that the European Commission was expected to approve the marketing of Iclusig in or about early July 2013; concerns raised by the U.S. Food and Drug Administration (“FDA”) regarding clinical trials for Iclusig in or about September and October 2013; the resumption of marketing and distribution of Iclusig in the United States in or about November and December 2013; and a confidential offer to acquire Ariad by another company in or about the summer of 2015.  In each instance, after NIKAS received the MNPI from LAVIDAS, he executed securities trades based on the MNPI, and then profited after the news was publicly announced.

The indictment charging NIKAS and LAVIDAS has been assigned to United States District Judge Denise Cote.

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A chart listing the age, place of residence, and charges for each of the six charged defendants is attached.  Various of the defendants are charged with conspiracy to commit securities fraud and fraud in connection with a tender offer, which carries a statutory maximum sentence of five years in prison, conspiracy to commit wire fraud and securities fraud, which carries a statutory maximum sentence of 20 years in prison, securities fraud pursuant to Title 15 of the United States Code, which carries a statutory maximum of 20 years in prison, fraud in connection with a tender offer, which carries a statutory maximum of 20 years in prison, wire fraud, which carries a statutory maximum of 20 years in prison, and securities fraud pursuant to Title 18 of the United States Code, which carries a statutory maximum of 25 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 defendants will be determined by the judge.

Ms. Strauss praised the work of the FBI.  She further thanked the Securities and Exchange Commission for its cooperation and assistance in this investigation.  She added that the FBI’s investigation was ongoing.  The Justice Department’s Office of International Affairs of the Department’s Criminal Division assisted in the investigation.

This case is being handled by the Office’s Securities and Commodities Fraud Unit.  Assistant U.S. Attorneys Richard Cooper and Daniel Tracer are in charge of the prosecution.   

The allegations contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

United States v. Benjamin Taylor and Darina Windsor, S7 19 Cr. 184 (VSB)

United States v. Bryan Cohen, 19 Cr. 741 (WHP)

United States v. Joseph El-Khouri, 19 Cr. 652 (JGK)

United States v. Georgios Nikas and Telemaque Lavidas, 19 Cr. 716 (DLC)