Florida Man Pleads Guilty To $2 Million Insider Trading Scheme Involving Confidential Information Misappropriated From An Investment Bank
Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that ROBERTO RODRIGUEZ pled guilty today before United States Magistrate Judge Henry B. Pitman to conspiracy to commit securities fraud and fraud in connection with a tender offer for his role in an insider trading scheme involving material nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank. In August 2017, RODRIGUEZ, Michael Siva, Rodolfo Sablon, and Jeffrey Rogiers were arrested and charged in a 54-count Indictment for their involvement in three insider trading schemes, all stemming from securities trades based on information misappropriated by Rivas. Rivas and an additional participant, James Moodhe, had previously pled guilty and are cooperating with the Government in this investigation. Since the unsealing of the Indictment, Sablon, Zoquier, and Rogiers, in addition to RODRIGUEZ, have pled guilty and will be sentenced by U.S. District Judge Alison J. Nathan.
U.S. Attorney Geoffrey S. Berman said: “As Roberto Rodriguez admitted today, he traded on confidential corporate information stolen by his longtime friend Daniel Rivas, reaping millions of dollars in illegal profits. Further, Rodriguez and another conspirator, Rodolfo Sablon, planned to use these illicit proceeds as seed money to start their own investment fund, intending to give an ownership stake to Rivas. Our Office is committed to identifying and prosecuting insider trading networks that undermine our nation’s securities markets.”
According to the allegations contained in the Indictment filed against RODRIGUEZ and his co-conspirators, and statements made in related court filings and proceedings:
The Investment Bank and Rivas
From August 2013 through May 2017, Rivas was employed as a technology consultant in the Research and Capital Markets Technology Group of an investment bank (the “Investment Bank”). In this role, Rivas had access to an internal, proprietary system maintained by the Investment Bank (the “Deal Tracking System”) containing material nonpublic information (“Inside Information”) about potential and unannounced merger and acquisition transactions, including tender offers, involving the Investment Bank. The Investment Bank’s written policies prohibited the unauthorized disclosure of confidential information, which included Inside Information. Rivas had a duty, among other obligations, to maintain the confidentiality of all of the Investment Bank’s confidential information, including the Inside Information.
Overview of Insider Trading Schemes
From August 2014 through April 2017, Rivas violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material nonpublic information from the Investment Bank’s Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades. On more than 50 occasions between August 2014 and April 2017, Rivas provided Inside Information about contemplated but unannounced merger and acquisition (“M&A”) transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities. In total, the insider trading based on Inside Information misappropriated by Rivas resulted in illicit profits of more than $5 million through trading in more than two dozen securities. The Inside Information was passed through three tipping chains.
The Rodriguez Tipping Chain
RODRIGUEZ was a member of the second of three tipping chains outlined in the Indictment. In this tipping chain, Rivas passed inside information to RODRIGUEZ, a childhood friend of Rivas with whom Rivas had maintained a close relationship as adults, and Sablon.
Since 2014, RODRIGUEZ lived and worked in Miami, Florida, with Sablon, with whom he was also friends. In 2015, RODRIGUEZ introduced Rivas to Sablon. Rivas and Sablon then communicated with each other directly and developed an independent relationship.
In the fall of 2015, Rivas disclosed to RODRIGUEZ that Rivas had access to Inside Information by virtue of his position as a corporate insider at an Investment Bank. At RODRIGUEZ’s request, Rivas also agreed to share Inside Information with Sablon. While Rivas had originally agreed to divulge Inside Information to RODRIGUEZ because of their history of friendship, Rivas also learned that RODRIGUEZ and Sablon intended to start an investment fund with the proceeds of the insider trading scheme. Rivas understood that in exchange for the Inside Information Rivas was providing to RODRIGUEZ and Sablon, Rivas would be invited to join the investment fund as a partner once it was successfully launched.
At first, Rivas communicated with RODRIGUEZ and Sablon primarily via phone and text message. As the scheme progressed, however, RODRIGUEZ and Sablon increased their efforts to hide their illegal activity. On several occasions, Rivas met personally with RODRIGUEZ and/or Sablon in Miami in order to provide them with Inside Information. Rivas also provided RODRIGUEZ and Sablon with Inside Information using an encrypted mobile messaging application (the “Messaging App”), which allows users to set a timer to messages to irretrievably “self-destruct.”
In order to maximize the illicit profits that could be earned using Rivas’s Inside Information, RODRIGUEZ and Sablon, in consultation with Rivas, initiated an aggressive strategy of purchasing short-term, out-of-the money call options. In total, from 2015 through April 2017, RODRIGUEZ and Sablon earned more than $2 million in illicit profits through insider trading in more than two dozen securities based on Inside Information divulged by Rivas.
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RODRIGUEZ, 33, of Miami, Florida, pled guilty to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer (Count 21), which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. RODRIGUEZ will be sentenced before Judge Nathan.
The allegations contained in the Indictment as to Michael Siva, the sole defendant who had not pleaded guilty, are merely accusations, and he is presumed innocent unless and until proven guilty.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for their assistance. He added that the investigation is continuing.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Andrea M. Griswold and Samson Enzer are in charge of the prosecution.
 As for the defendant who has not pled guilty (Michael Siva), the charges described herein constitute only allegations, and Siva is presumed innocent unless and until proven guilty.