Risk & Compliance

Seven Accused in $5M Insider Trading Scheme

The SEC says the scheme revolved around an IT consultant who had access to a computer system that BofA used to track investment banking deals.
Matthew HellerAugust 17, 2017

Seven people have been charged with making more than $5 million in illicit profits through insider-trading rings that centered around a former Bank of America technology consultant.

The U.S. Securities and Exchange Commission said that the consultant, Daniel Rivas, misused his access to a BofA computer system to tip off his co-defendants to 30 impending deals between October 2014 and April 2017.

The tips were allegedly shared with his girlfriend’s father, James Moodhe, and with two separate groups of friends. According to the SEC, its investigation revealed that the traders used shell companies, code words, and an encrypted, self-destructing messaging application to evade detection.

All seven of the defendants named in the SEC’s civil complaint have been indicted on parallel criminal securities fraud charges. Rivas, 32, and Moodhe, 60, a former treasurer for a financial services company, pleaded guilty last week and are cooperating with the government’s investigation.

“This case involves repeated insider trading based on tips about dozens of confidential mergers and acquisitions stolen by an IT employee at a bank,” Jina L. Choi, director of the SEC’s San Francisco Regional Office, said in a news release.

After initially working for BofA in its capital markets technology group, Rivas in June 2014 joined a team of IT employees responsible for maintaining a computer system that the bank used to track its investment banking deals.

That role, the SEC said, gave Rivas access to confidential information about hundreds of potential corporate transactions.

According to the SEC, the first “tipping chain” involved Rivas, Moodhe and Michael Siva, a financial advisor at a brokerage firm. Moodhe alone allegedly made $2 million in illicit profits by trading on Rivas’s tips about impending deals, which typically included the names or stock trading ticker symbols of the target and acquiring companies, the expected deal price, and the expected announcement date of the deal.

In a particularly profitable trade, the government said, Moodhe and Siva together purchased nearly 30,000 shares in AstraZeneca, sold out after news of a tender offer by ZS Pharma was made public, and pocketed nearly $600,000 in profits.