Risk & Compliance

Three Charged in $250K Insider Trading Scheme

A relationship between an ecommerce executive and a gas station operator leads to trading on inside information.
Matthew HellerFebruary 9, 2016
Three Charged in $250K Insider Trading Scheme

A Los Angeles businessman and two of his associates have been charged with trading on inside information he obtained from an executive at GSI Commerce before it was acquired by eBay in March 2011.

The U.S. Securities and Exchange Commission said the GSIC executive was a close friend of gas station operator Robert Munakash. During a trip to the Super Bowl in February 2011, the GSIC executive told Munakash in confidence that GSIC was likely to engage in a strategic transaction with a private equity firm or be acquired by another company.

Based in part on that information, Munakash, his employee Carlos Rodriguez, and his broker Marc Winters bought more than $600,000 of GSIC stock, eventually realizing combined profits of more than $226,000 after eBay’s acquisition of GSIC was announced, the SEC alleged in a civil complaint.

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Rodriguez also allegedly tipped off a close relative, who made a profit of more than $24,000.

According to the SEC, Munakash’s friend was an executive vice president of strategic business development at GSIC. They had met in 2004 and “communicated regularly and socialized often,” celebrating birthdays and vacationing together, the SEC said.

The GSIC executive “believed that information shared between the two of them would be kept in confidence,” according to the SEC.

During the Super Bowl trip from Feb. 4 to Feb. 7, 2011, the complaint says, Munakash’s friend told him he was excited about a Feb. 10 meeting where he expected a private equity firm to make a bid for GSIC and that even if that deal did not work out, another company had expressed interest in acquiring the e-commerce company.

The day after returning from the trip, Munakash allegedly bought GSIC shares for himself and tipped Rodriguez and Winters. Munakash and Rodriguez made additional purchases after Munakash learned additional information about the potential acquisition during his friend’s birthday dinner on Feb. 28, 2011, the SEC said.

Following the public announcement of GSIC’s proposed acquisition by eBay on March 28, 2011, its stock price increased by more than 50%. Munakash allegedly realized profits of more than $178,000.

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