Australian Research Analyst Pleads Guilty In Manhattan Federal Court To Insider Trading Charges
Preet Bharara, the United States Attorney for the Southern District of New York, announced that TRENT MARTIN, a former research analyst at an international financial services firm, pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The scheme involved the misappropriation of material, non-public information (“Inside Information”) concerning IBM’s acquisition of a software company, SPSS, Inc., in 2009. MARTIN was arrested on these charges in Hong Kong in December 2012 and extradited to the United States in March 2013. He pled guilty today before U.S. District Judge Andrew L. Carter, Jr., pursuant to a cooperation agreement.
According to the Indictment to which MARTIN pled guilty, statements made during the plea proceeding, and other court documents:
The Inside Information concerning IBM’s acquisition of SPSS originated from a corporate lawyer who was part of the legal team that represented IBM in the transaction (“Attorney-1”) in 2009. On May 31, 2009, Attorney-1 shared Inside Information concerning the transaction, including the names of the parties and the fact that IBM was going to acquire SPSS for a significant premium over SPSS’s market price, with his close friend, MARTIN. The information was shared in confidence. Based on their longstanding history of sharing confidences, Attorney-1 expected that MARTIN would not share the information or use it to trade.
However, thereafter, MARTIN bought SPSS common stock based on the Inside Information he was given by Attorney-1 and, in turn, shared the tip with his roommate, Thomas Conradt, who worked as a stock broker at a securities trading firm (“Securities Trading Firm-1”). Conradt bought SPSS common stock and tipped David J. Weishaus, his co-worker at Securities Trading Firm-1. Weishaus allegedly bought call option contracts in SPSS based on the Inside Information. In addition, it is alleged that Conradt and Weishaus tipped their co-workers at Securities Trading Firm-1 (“CC-1 and CC-2”), who also bought SPSS call option contracts based on the Inside Information.
On July 23, 2009, MARTIN told Attorney-1 that he had purchased SPSS common stock and call options on the basis of the Inside Information that Attorney-1 had disclosed to him.
When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41% in one day, from the prior day’s closing price of $35.09 per share to a closing price of $49.45 per share. Thereafter, MARTIN, Conradt, Weishaus, CC-1, and CC-2 sold their SPSS positions, yielding profits of $7,900, $2,538, $129,290, $629,954, and $254,360, respectively, for a total profit in excess of $1 million.
In the fall of 2010, after the U.S. Securities and Exchange Commission (“SEC”) had begun investigating insider trading in SPSS, MARTIN told Attorney-1 that he had profited approximately $8,000 from the Inside Information concerning IBM’s acquisition of SPSS and had disclosed it to his roommate, Conradt, before the transaction was publicly announced. MARTIN also told Attorney-1 that MARTIN believed Conradt had taken a large position in SPSS before the announcement and had, in turn, shared the Inside Information with others.
MARTIN, 34, of Sydney, Australia, pled guilty to one count of conspiracy to commit securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. As part of his plea agreement, MARTIN agreed to forfeit his share of the proceeds obtained from the offense. He is scheduled to be sentenced by Judge Carter on March 14, 2014 at 2:00 p.m.
Conradt pled guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud on April 3, 2013. He is scheduled to be sentenced on October 3, 2013 at 10:00 a.m.
The charges against Weishaus remain pending and he is presumed innocent unless and until proven guilty. Weishaus is next scheduled to appear before Judge Carter on October 3, 2013 at 10:00 a.m.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission and noted that the investigation is continuing.
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. The task force was established to wage an aggressive,
coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20
federal agencies, 94 U.S. attorneys’ 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 nearly 10,000 financial fraud cases
against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For
more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John T. Zach and David B. Massey are in charge of the prosecution.