Broker Charged With Insider Trading And Obstruction Of Justice

 

Ronald Smith Made Millions for his Brokerage Clients and for Himself by Trading Based on Information Stolen From an Investment Bank

United States Attorney for the Southern District of New York, Jay Clayton, announced today the unsealing of an Indictment charging RONALD SMITH, formerly a registered broker at a brokerage firm in New York City, with securities fraud, wire fraud, falsification of records, and conspiracy.  The charges arise from an alleged insider trading scheme in which SMITH used confidential corporate deal information stolen from an investment bank in New York City to make millions of dollars in illegal profits trading securities on behalf of himself, his girlfriend, and his brokerage clients.  SMITH will be presented today before U.S. Magistrate Judge Ona T. Wang.  The case has been assigned to U.S. District Judge George B. Daniels. 

“As alleged, Ronald Smith used confidential deal information stolen from an investment bank in New York City to generate millions in profits for himself, his girlfriend, and his clients,” said U.S. Attorney Jay Clayton.  “The hallmarks of our world-leading securities markets are transparency and fairness.  Insider trading undermines those principles, and our Office will pursue insider traders vigorously.” 

As alleged in the Indictment unsealed today in Manhattan federal court:

SMITH was a registered broker at a brokerage firm in New York City, where he worked with his fellow broker and friend, Jordan Meadow.  Over time, SMITH and Meadow came to share a book of clients and would split commissions on trades executed in those clients’ accounts.  In 2021, Meadow started receiving information about planned corporate acquisitions from a source with illicit access to confidential investment banking documents.  Meadow provided the stolen information to SMITH, and they each placed securities trades based on the information even though they understood the information had been wrongfully obtained.

Meadow received the stolen information from his friend, Steven Teixeira, who obtained it by secretly accessing confidential work documents on a computer belonging to Teixeira’s then-girlfriend, an executive assistant at an investment bank.  Those documents contained confidential information about planned corporate acquisitions in which the investment bank served as an adviser.

Among the planned corporate acquisitions that Teixeira learned about by secretly accessing his then-girlfriend’s computer were planned acquisitions of Score Media and Gaming Inc. and of VMware, Inc.  Teixeira shared that information with Meadow, who, in turn, shared it with SMITH.  Despite knowing that the information came from an illicit source, SMITH and Meadow profitably traded on it: they purchased Score and VMware securities before any public announcement of acquisitions and then sold those securities at a profit after the public announcements of the acquisitions caused the stock prices to rise.  SMITH and Meadow used the stolen information not only to trade for themselves, but also to place trades on behalf of some of their brokerage firm clients.  As a result of that trading, SMITH earned approximately $484,000 in profits on Score and $47,000 on VMware; he earned his girlfriend approximately $25,000 in profits trading the securities; and together, SMITH and Meadow earned nearly $5 million in profits for their clients, on which they earned approximately $500,000 in commissions.  In exchange for receiving the profitable confidential information, SMITH and Meadow agreed to give gifts or other compensation to the sources of the information, including Rolex watches (although they never followed through on providing compensation).

In the fall of 2021, FINRA contacted SMITH and Meadow, inquiring into what motivated their decision to invest in Score.  SMITH and Meadow coordinated their responses, in which they falsely conveyed that their Score trades were based on research into publicly available information about the company and its sector, and not based on material nonpublic information.

SMITH, 37, of Stamford, Connecticut, is charged with three counts of securities fraud under Title 15, one count of wire fraud, and one count of falsification of records, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and two counts of conspiracy, each of which carries a maximum sentence of five years in prison.

The maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Clayton praised the outstanding work of the Federal Bureau of Investigation.  Mr. Clayton also thanked the U.S. Securities and Exchange Commission, which today filed a separate action.