Federal prosecutors announced Wednesday that 30 people have been charged in a sweeping insider trading scheme in which attorneys allegedly leveraged their positions to obtain confidential information surrounding pending mergers and acquisitions in exchange for kickbacks.
Authorities arrested 19 individuals on charges stemming from the alleged decade-long plot, the U.S. Attorney’s Office for the District of Massachusetts said in a press release. Two suspects are located in Russia and Israel, and are considered fugitives.
Those taken into custody include California attorney Nicolo Nourafchan, whom federal prosecutors have identified as the alleged orchestrator of the scheme that earned tens of millions of dollars. He faces two additional counts of obstruction of justice.
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“Everyone charged today is accused of scoring significant profits from expected market moves and making out like bandits,” Ted Docks, special agent in charge of the Federal Bureau of Investigation’s Boston Division, said in a statement. “That’s not merely gaming the system – it’s a federal crime.”
Federal prosecutors allege Nourafchan, among others, leveraged his role as a licensed corporate attorney at several large law firms to access internal computer networks in order to obtain confidential information regarding looming pending mergers.
Nourafchan then allegedly supplied the unreleased information to others in exchange for kickbacks, authorities said.
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Prosecutors also said Nourafchan and his partner, New York attorney Robert Yadgarov, allegedly propositioned other attorneys and industry insiders to obtain confidential information in exchange for hundreds of thousands of dollars in cash.
From there, Nourafchan and Yadgarov would provide the information to a network of traders and other middlemen, including Gavryel Silverstein and Lorenzo Nourafchan, who would subsequently relay it to other individuals, according to federal authorities.
The traders would then allegedly execute trades on Nourafchan and Yadgarov’s behalf – or their own behalf – in exchange for kickbacks, or pass along the information to other traders with the ultimate goal of profiting from the deals.
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In one instance, Nourafchan took a “leave of absence” from his role at a law firm and viewed confidential documents relating to the acquisition of iRobot – which was later abandoned, prosecutors allege.
Federal prosecutors said traders – located both overseas and in states such as California, Florida, New York and New Jersey – allegedly conducted transactions based off the confidential information stemming from nearly 30 merger deals involving several public companies, including some of the largest deals over the last decade.
They often spoke in code in an attempt to avoid detection by law enforcement, authorities added.
The 30 defendants face a slew of federal charges, including conspiracy to commit securities fraud and money laundering conspiracy, prosecutors said.
“Anyone who engages in insider trading fundamentally undermines the trust necessary for our financial markets to function,” Docks said, adding, “The FBI is committed to ensuring that those markets are a level playing field, not just profiting those with friends in the know.”
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