Three friends profited millions from insider trading and now face criminal charges

Rick Steves

David Schottenstein made over $600,000 in profits, close friend Ryan Shapiro made about $121,000, but Kris Bortnovsky made the most out of the inside information: $4 million.

The Securities and Exchange Commission has pressed charges against three traders for making their orders in advance of market moving announcements, commonly known as insider trading.

David Schottenstein allegedly obtained inside information and used it to trade in advance of an August 2017 DSW earnings announcement and a December 2018 tender offer to acquire Aphria.

The SEC argued he also received information and traded ahead of the February 2018 announcement of a merger agreement between Albertsons Companies, Inc. and Rite Aid.

Source was a cousin

According to the US regulator, the source of information was David Schottenstein’s cousin, who served on the board of directors of both DSW and the company that had attempted to acquire Aphria. The cousin’s family also owned a private business that was involved in the Rite Aid transaction.

Besides Schottenstein alleged illicit gains of more than $600,000 in his personal brokerage accounts from these three market moving announcements, two other individuals made similar trades ahead of these announcements.

This happened because Schottenstein tipped two close friends, Kris Bortnovsky and Ryan Shapiro, who took the opportunity to profit from insider trading. Shapiro allegedly traded Rite Aid and Aphria and reaped total profits of approximately $121,000.

FinanceFeeds webinar: Expert panel to discuss market data for multi-asset brokerages  

Insider traders “are no match for the SEC’s sophisticated data analysis”

Kris Bortnovsky’s trades were made through his investment management firm, Sakal Capital Management, LLC, and one of its hedge funds, Sakal U.S. Fund, LLC, in addition to trading in individual brokerage accounts owned by himself and another person. His total profits totaled more than $4 million.

Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit, said: “Traders who seek to profit from inside information are no match for the SEC’s sophisticated data analysis methods like the ones used to uncover this alleged insider trading ring. We will continue to pursue illegal trading to bring wrongdoers to justice and ensure fair markets for all participants.”

The SEC’s complaint charges the three individuals and two investment vehicles with violating the antifraud provisions of the federal securities laws, and seeks permanent injunctions and civil penalties. The U.S. Attorney’s Office for the District of Massachusetts pressed criminal charges against Bortnovsky, Schottenstein, and Shapiro.

Read this next

Retail FX

ThinkMarkets expands CFDs lineup to over 4000 ETFs and shares

ThinkMarkets has expanded its service offering by incorporating 2500 new CFDs on shares and ETFs on its ThinkTrader platform.

Retail FX

France regulator warns investors of Omega Pro, Businessempire.fr

France’s financial markets regulator alerted investors that scams related to Omega Pro Ltd are beginning to circulate, with the blacklisted firm capitalizing on the situation to run a range of “unrealistic” offers.

Digital Assets

Web3 platform Grand Time paid $2 million in token earnings to date

Community-driven Web3 platform Grand Time said its offering – which includes a multifaceted platforms and its native token – has been gaining significant traction highlighted by impressive operational metrics.

Institutional FX

FX volumes at MOEX halved in April as ruble gains gorund

Currency trading at Moscow Exchange (MOEX) halted its upward route in April as monthly volumes nearly halved from a month earlier.

Digital Assets

FTX US adds stock trading, fractional shares to crypto platform

FTX US, the American subsidiary of crypto exchange FTX has kicked off stock trading feature to its customers in an effort to compete with popular platforms such as Robinhood and eToro.

Industry News

UK FCA empowered to remove brokers’ permissions in 28 days

Businesses with permissions they don’t need or use, risk misleading consumers. These new powers will enable us to take quicker action to cancel permissions that are not used or needed.

Industry News

CFTC charges $44m Ponzi scheme but millions may have fled to foreign crypto exchange

The CFTC alleged that defendants transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool.

Technology

Saxo Bank deploys Adenza to address Basel and EBA requirements

The integration of ControllerView will enhance Basel-driven capital calculations and reporting at Saxo Bank in support of the bank’s multijurisdictional capital and liquidity reporting requirements throughout Denmark, Switzerland and UK, with plans to expand into the Netherlands.

Executive Moves

ComplySci appoints CTO, CPO, and CLO to further regtech’s product expansion

ComplySci offers compliance software used by more than 1400 global institutions to identify risk and address regulatory compliance challenges.

<