The owner of a fractional CFO firm is among a set of 21 people facing charges in a wide-ranging insider trading case.
In a case brought by the Securities and Exchange Commission in federal court in Boston, prosecutors said the defendants participated in an “insider trading scheme that netted the participants millions of dollars in illicit profits from trading in the securities of U.S. companies.”
The SEC’s complaint, filed on May 6, described the details of a complex plot said to have taken place between 2018 and 2024. The document said that M&A attorney Nicolo Nourafchan and his friend Robert Yadgarov orchestrated the insider trading scheme and recruited Gabriel Gershowitz, another corporate attorney, to help out. The complaint accused Nourfchan of “misappropriating material nonpublic information about approximately a dozen impending corporate transactions (such as mergers, acquisitions, and a tender offer) … from his law firm employers and tipping that information with Yadgarov and others to the co-Defendants.”
The SEC went on to say that Gershowitz also gave Nourafchan and Yadgarov “material nonpublic information obtained from his law firm employers.”
Lorenzo Nourafchan, Nicolo’s brother and founder of fractional CFO firm Northstar Financial Advisory, was one of the individuals who allegedly received confidential information and “agreed to kick back a portion of the trading profits to Nourafchan and/or Yadgarov in exchange for such information.”
The leaked information didn’t end with Lorenzo, who went on to share it with his hair stylist ahead of two deals, according to the complaint. The hair stylist then went on to “trade on confidential information” supplied by Lorenzo.
Prosecutors alleged that the defendants began to use “coded language” to hide the true nature of their insider trading scheme. In some instances, defendants referred to “tips as airline ‘flights,’” according to the complaint. In other instances, prosecutors said, defendants masked discussion of the alleged scheme by talking about “religious events or activities.”
“In some cases, for example, the dates of nonpublic corporate transactions were referred to as the dates on which a ‘rabbi’ was scheduled to have ‘surgery,’” the complaint stated. “Religious ‘learning’ was used as code for passing inside information.”
Nicolo and Lorenzo Nourafchan were also named as defendants in two different indictments brought by the Department of Justice. In total, the DOJ said it is charging 30 people for their alleged involvement in a “large-scale, decade-long insider trading scheme.” The department said 19 people were arrested last week.
“The trading on unannounced financial news alleged here not only violated the securities laws, but it also took advantage of the special access and ethical duties that come with a law license,” said United States Attorney Leah Foley, U.S. attorney for the district of Massachusetts, in a separate May 6 news release. “If the American people believe that trading is only for the connected, they will keep their investment and retirement savings out of the markets, which will hurt our economy.”
The DOJ’s two indictments don’t name the “several large law firms” that Nicolo Nourafchan worked for, but Bloomberg reported that two of his former employers included Latham & Watkins and Goodwin Procter. In a statement to the news outlet, Goodwin leaders said they “are deeply disappointed that a former employee is alleged to have violated the trust placed in him and misused confidential information as part of a broader criminal scheme affecting multiple law firms and their clients.”
“We have been cooperating and continue to cooperate fully with law enforcement,” the law firm told Bloomberg in a statement.
The news outlet also reported in a separate article that Gershowitz and eight other defendants have already pleaded guilty and are “cooperating with the government.”
