Head Of Stock Trading Operation, Steven Fishoff Sentenced to 30 Months
The owner and operator of a stock trading operation was sentenced today to 30 months in prison for trading on inside information related to confidentially marketed stock offerings as part of a multimillion-dollar insider trading scheme, U.S. Attorney Craig Carpenito announced.
Steven Fishoff, 61, of Westlake Village, California, previously pleaded guilty before U.S. District Judge Michael A. Shipp to Count Four of an indictment, charging him with securities fraud. Judge Shipp imposed the sentence today in Trenton federal court.
photo/ Gerd Altmann
According to documents filed in this case and statements made in court:
On numerous occasions between May 2010 and August 2013, Fishoff, Ronald Chernin, Steven Costantin, Paul Petrello, and Joseph Spera short sold the securities of numerous public companies, on the basis of inside information obtained by Fishoff and others acting with or on behalf of Fishoff.
For each of these offerings, Fishoff or one or more of the day traders that he employed —including his friend, Chernin, and his brother-in-law, Costantin — entered into confidentiality or “wall-crossing” agreements as representatives of Fishoff’s trading entities, whereby they agreed not to disclose or trade on inside information concerning the offerings, such as the name of the issuers and the timing and pricing of the transactions, and were “brought over the wall” for the narrow purpose of determining whether to purchase the offered securities.
In breach of the confidentiality and trading restrictions of the wall-crossing agreements, Fishoff tipped Petrello and Spera (who is identified as CC-1 in the indictment), either directly or through Petrello, with the inside information about the confidentially marketed offerings — specifically, advising them of the stock trading symbols of the companies, and the timing and sometimes the pricing of the upcoming offerings.
Fishoff shorted the stock of the public companies, including Synergy Pharmaceuticals, Inc., based on the inside information, in anticipation of a drop in the stocks’ price when the stock offerings were disclosed to the public. Fishoff and his co-defendants traded through the accounts of their respective trading entities or through related accounts that they controlled, shorting the securities and covering the short positions after the stock offerings were publicly announced.
By trading on this valuable, nonpublic information in violation of the confidentiality agreements, Fishoff and his co-defendants gained more than $3.9 million in profits over the course of the three-year scheme. Petrello and Spera split their profits with Fishoff, generally on a 50-50 basis, as compensation to Fishoff for the inside information that he provided to them. Chernin and Costantin, who executed trades using Fishoff’s capital, also split their combined profits with Fishoff on a 50-50 basis.
In addition to the prison term, Judge Shipp sentenced Fishoff to three years of supervised release and fined him $50,000. Fishoff also agreed to settle the parallel civil forfeiture action, United States of America v. The Contents of Wedbush Securities Account Number 8313 et al., Civil Action No. 17-5334, and to forfeit the property named as defendants in rem in the verified complaint filed in the parallel civil forfeiture action.
Chernin, Costantin, Petrello, and Spera also have pleaded guilty in the insider trading scheme and are awaiting sentencing.
U.S. Attorney Craig Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark, for the investigation leading to today’s sentencing. He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office under the direction of Sanjay Wadhwa.
The government is represented by Assistant U.S. Attorney Shirley U. Emehelu, Chief of the Asset Recovery Money Laundering Unit, Assistant U.S. Attorney Nicholas P. Grippo of the Economic Crimes Unit, and Assistant U.S. Attorney Sarah Devlin of the Asset Recovery Money Laundering Unit.
Defense counsel: Daniel Brown Esq. and Lionel André Esq., Washington, D.C.
