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Insider Trading Case: Frequent Flyers, Potatoes and Macy's

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Mar 26, 2010 11:26 am


An irreverent Wall Street Blog

by Bill Singer 

Insider Trading: Frequent Flyers, Potatoes and Macy's 

Written: March 25, 2010

On March 24, 2010, the Securities and Exchange Commission (SEC) alleged in a Complaint filed in the United States District Court for the Southern District of New York  that Defendant Igor Poteroba, a high-ranking investment banker in UBS Securities LLC’s Global Healthcare Group in New York City, tipped his friend Defendant Aleksey Koval with highly confidential inside information about impending transactions involving pharmaceutical companies. Koval, who held positions at securities industry firms at the time, then traded in stocks and options of the companies targeted for acquisition. Koval also tipped their friend Defendant Alexander Vorobiev, who traded ahead of four of the deals.

The SEC further alleges that some of the insider trading was conducted through brokerage accounts held in the names of Tatiana Vorobieva (Vorobiev’s wife) and Anjali Walter (Koval’s wife) and that portions of the proceeds from the illicit trading were received by Vorobieva and Walter. Accordingly, Vorobieva and Walter are named as Relief Defendants to recover investor assets now in their possession. Securities and Exchange Commission v. Igor Poteroba, Aleksey Koval and Alexander Vorobiev (SDNY March 24, 2010)

Among the means of communication allegedly used to illegally tip and trade on the inside information were coded e-mail messages that referred to securities and money as “frequent flyer miles” and “potatoes.” They coded one e-mail exchange about insider trading as a discussion about a Macy’s wedding registry.

On March 24, 2010, Preet Bharara, the United States Attorney for the Southern District of New York, announced the arrests of Igor Poteroba and Alexei P. Koval for their alleged participation in an insider trading scheme. As set forth in a four-count criminal Complaint, from 2005 through at least February 2009, Poteroba allegedly agreed to leak confidential information about UBS and six of its clients to Koval. Poteroba and Koval each are charged with one count ofconspiracy to commit securities fraud and three counts of securities fraud. The conspiracy charge carries a maximum sentence of five years in prison and a maximum fine of the greater of $250,000, or twice the gross gain or gross loss fromthe offense. Each securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million.

Please remember that the above allegations are merely that, and all Defendants are presumed innocent until proven guilty.

BILL SINGER'S COMMENT:  Given my role as a prominent critic of ineffective Wall Street regulation, it is all the more important that I avoid being merely a shrill voice that consistently but unfairly criticizes.  Without question,the SEC Staff in Poteroba has done a superb job in drafting the Complaint and setting forth in compelling detail its case.  Similarly, I compliment Preet Bharara and his staff for the presentation of their criminal case, and I would note the the US Attorney's Office for the SDNY has been consistently outstanding in its handling of Wall Street misconduct under Mr. Bharara's tenure. 

I have posted a full analysis and discussion of both the SEC and Criminal cases at and urge you all to take the time to read this fascinating story.