Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a criminal indictment charging MOSHE STRUGANO, an Israeli lawyer specializing in the creation of offshore companies, with securities fraud and conspiracy to commit securities fraud in connection with a scheme to commit insider trading based on material, nonpublic information regarding the upcoming public announcement that Ormat Technologies Inc. (“Ormat”), a renewable energy company, would be acquiring U.S. Geothermal, Inc. (“U.S. Geothermal”). The United States intends to seek the extradition of STRUGANO.
U.S. Attorney Damian Williams said: “As alleged, Moshe Strugano, a corporate lawyer, traded on nonpublic information for personal gain. His charged actions show a brazen disregard for laws intended to keep a level playing field for investors.”
FBI Assistant Director-in-Charge Michael J. Driscoll said: “Time and again, we see greedy, unscrupulous actors trade securities based upon their access to material non-public information. As alleged, Mr. Strugano is another in a long series of similar illegal actors. Today's action is an example of our commitment to insuring our financial markets are fair for all investors.”
According to the allegations in the Indictment unsealed today in Manhattan federal court[1]:
Ormat is a publicly traded renewable energy company headquartered in Nevada with offices and facilities in Yavne, Israel.
U.S. Geothermal was a publicly traded renewable energy company that operated geothermal power projects in Oregon, Nevada, and Idaho. U.S. Geothermal’s common stock traded under the symbol “HTM” on the NYSE American.
Between in or about September 2017 and January 2018, Ormat engaged in merger negotiations with U.S. Geothermal. A co-conspirator not named in the Indictment (“CC-1”) served as Ormat’s Head of Mergers and Acquisitions and was one of Ormat’s principal negotiators for the deal. In that role, CC-1 had access to material, nonpublic information about the deal. CC-1 and STRUGANO, who both lived in the vicinity of Tel Aviv, Israel, maintained a personal relationship and friendship.
On or about December 19, 2017, the Ormat board approved acquiring U.S. Geothermal at a price of up to $5.50 per share, which was U.S. Geothermal’s asking price prior to the Ormat board meeting. Almost immediately after the Ormat board meeting ended, CC-1 tipped off STRUGANO that the Ormat-U.S. Geothermal deal was going to close through a coded WhatsApp message. Within minutes of receiving that message, STRUGANO placed a failed WhatsApp call to his broker (the “Broker”) for a bank account he controlled at a Swiss bank (“Bank-1”). STRUGANO then tried to call the Broker another four times over the next four minutes. Minutes later, STRUGANO placed a telephonic order with Bank-1 to purchase over $20,000 in U.S. Geothermal shares. This was the first time STRUGANO had ever asked Bank-1 to purchase U.S. Geothermal stock for his accounts.
Over the next several weeks, STRUGANO directed the Broker to purchase large blocks of U.S. Geothermal shares. By January 18, 2018, STRUGANO had purchased over $2.7 million in U.S. Geothermal shares, for an approximately 3.8% equity stake in the company. For the time period from December 19, 2017 through January 18, 2018, STRUGANO was responsible for approximately one third of the total trading volume in U.S. Geothermal stock.
On January 18, 2018, STRUGANO was informed that his account at Bank-1 was in shortfall. STRUGANO asked the Broker to buy him time to cover the shortfall, asking for a few days, and then on January 24, 2018, for a few more hours. Less than an hour later, Ormat and U.S. Geothermal announced their merger. When the market opened that day, the U.S. Geothermal stock price jumped. After the deal was announced, STRUGANO sold all of his shares and realized profits of approximately $1.2 million.
STRUGANO, 52, of Caesarea, Israel, is charged with one count of conspiracy to commit securities fraud, which has a maximum sentence of five years in prison, and two counts of securities fraud, which have maximum sentences of 20 and 25 years in prison, respectively.
The statutory maximum sentences are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Williams praised the outstanding work of the FBI. Mr. Williams further thanked the U.S. Securities and Exchange Commission, which today filed a parallel civil action against the defendant, for its assistance and cooperation in this investigation.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
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