[Image:  Insidermoney.com]

The SEC busted an insider trading scheme involving 7 individuals who generated over $5 million in profits by trading on confidential information about dozens of impending mergers and acquisitions.  Data analysis allowed the SEC’s enforcement staff to uncover the illicit trading despite the traders’ alleged use of shell companies, code words, and an encrypted, self-destructing messaging application to evade detection.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today unsealed criminal charges against the same 7 individuals.

THE DEFENDANTS.

• DANIEL RIVAS (age 32).  The "mastermind." A resident of Hasbrouck Heights, NJ. From August 2013 to April 2017, Rivas worked in Bank of America’s capital markets technology group in New York, NY. In 2014, Rivas joined a team of IT employees responsible for maintaining a computer system the Bank used to track its investment banking deals. Rivas had access to highly-confidential information about hundreds of potential business combinations that had not yet been announced to the public.
• JAMES MOODHE (60).  Resident of New City, NY. Until May 2017, Moodhe worked as an assistant controller and treasurer for a financial services company. Moodhe is the father of Rivas’ girlfriend.
• MICHAEL SIVA (55).  A resident of West Orange, NJ. Siva works in the Morristown, NJ, office of The Brokerage Firm, a subsidiary of a large financial services corporation. Siva is Moodhe’s friend and financial advisor.
• ROBERTO RODRIGUEZ (32).  A resident of Miami Gardens, FL. Rodriguez is an executive at a tutoring company. He is Rivas’s friend.
• RODOLFO SABLON (37).  A resident of Miami, FL. Sablon is an executive at a tutoring company. He is Rodriguez’s and Rivas’s friend.
• JHONATAN ZOQUIER (33).  A resident of Englewood, NJ. Zoquier is a delegate for a local branch of a large international employee union. He is Rivas’s friend.
• JEFFREY ROGIERS (33).  A resident of Oakland, CA. Rogiers is a software engineer. He is Zoquier’s friend and also knows Rivas.

SEC FINDINGS.    From October 2014 to April 2017, Daniel Rivas, a former IT employee at Bank of America Corporation, was at the center of the alleged scheme. For more than 2 years, Rivas misappropriated material nonpublic information on some 30 impending deals by repeatedly passing the information to defendants his so-called “Direct Tippees:  Moodhe, Rodriguez, Sablon and Zoquier. These individuals traded on the information and pass Rivas’ tips to others – creating 3 different tipping chains.

• Rivas frequently tipped his girlfriend’s father, James Moodhe, a former financial services company treasurer, who traded on the information.
• Moodhe, in turn, used coded conversations and in-person meetings to relay the tips to his friend, Michael Siva, a financial advisor at a brokerage firm. 
• Siva used the confidential information in several ways: he enter trades on behalf of his brokerage clients (and thus earned commissions for himself), he passed along tips to a client who traded on them, and he traded on behalf of himself and his wife based on 2 of the tips he got from Moodhe.

A separate trading ring allegedly involved 2 of Rivas’s friends in Florida - Roberto Rodriguez and Rodolfo Sablon. They discussed tips on an encrypted, self-destructing smartphone messaging application and used shell companies to carry out their insider trading.  Although Rodriguez and Sablon were inexperienced traders, in just over a year they turned less than $100,000 into more than $2 million in profits by making aggressive options trades based on the confidential information.  Rodriguez also is alleged to have passed several tips to one of his friends who also traded.

A 3rd trading ring involved Jhonatan Zoquier, another inexperienced trader who profited by trading on inside information communicated through the encrypted messaging application.  Zoquier repeatedly passed the confidential information along to Jeffrey Rogiers, who placed several illegal trades for himself and tipped others to trade.

The trading scheme was uncovered by the SEC Market Abuse Unit’s Analysis and Detection Center, which uses data analysis tools to detect suspicious patterns – e.g., improbably successful trading across different securities over time.  Enhanced detection capabilities enabled SEC enforcement staff to spot the unusual trading activities.

The SEC investigation continues.