Hedge fund analyst Matthew Teeple was released on $200,000 bond in New York in connection with what prosecutors call a $27 million insider-trading scheme.
Teeple, an analyst for an unidentified San Francisco-based hedge fund, didn’t enter a plea today before Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court to charges of conspiracy and securities fraud.
David Riley, the former chief information officer for Foundry Networks, was charged in March in a felony complaint filed in Manhattan accusing him of tipping Teeple about Foundry’s acquisition by Brocade Communications Systems Inc. (BRCD) The U.S. Securities and Exchange Commission also sued the two, as well as a third man, John V. Johnson.
Eric Bruce, a lawyer for Teeple, declined to comment on his client’s court appearance today or name the hedge fund where Teeple works or if he is still employed there.
As part of the bail requirement, Teeple’s travel is restricted to New York and New Jersey and he must turn over his passport. Other requirements include alcohol tests to check for excessive use. If he tests positive he will undergo drug testing, the judge said. Teeple’s next hearing is set for April 25.
Teeple, dressed in a gray suit, spoke only to confirm he understood the judge’s instructions.
Riley, Teeple and Johnson are the latest to be charged as part of a law enforcement initiative by Bharara’s office and the FBI in New York against insider trading at hedge funds. At least 80 people have been arrested since August 2009 as part of the insider-trading crackdown. Bharara’s office has won convictions of at least 72 people.
Teeple was first arrested by FBI agents in March in San Clemente, California. He appeared before a federal magistrate in Santa Ana, California, and was released on two $100,000 bonds secured by his wife and his father.
Riley also was charged with conspiracy and securities fraud. The most serious charge of securities fraud carries a sentence of as long as 20 years in prison, Manhattan U.S. Attorney Preet Bharara’s office said.
Johnson, 46, of Arvada, Colorado, who the U.S. said was a portfolio manager for a Denver-based firm, pleaded guilty to insider-trading charges on March 18 before U.S. District Judge John Keenan in New York.
“When David Riley and Matthew Teeple chose to traffic in inside information involving high-tech companies, they embarked on a high-stakes game that has repeatedly proven to be unwinnable,” Bharara said in a statement in March.
On July 16, 2008, Riley provided secret tips about Foundry being acquired by Brocade to Teeple before the deal was announced on July 21, 2008, prosecutors said. Within two hours of his conversation with Riley, Teeple called an analyst at the unidentified investment adviser, causing the fund to execute trades based on the inside information, according to the U.S.
In total, trading on the tips, one investment adviser earned more than $16 million and avoided losses of more than $11 million, Bharara’s office said.
The U.S. said Teeple also provided tips about Foundry’s 2008 acquisition by Brocade to two acquaintances, Johnson and Karl Motey, a California-based investment adviser. Johnson traded the information and made more than $136,000 in profit, prosecutors said.
The investment adviser, which wasn’t named by the U.S., is a registered investment adviser based in San Francisco that serves multiple hedge funds that have about $1.7 billion of assets under management, the SEC said.
The SEC identifies Johnson as currently serving as the chief investment officer of a state pension system. At the time the SEC alleges the insider trading occurred, Johnson was unemployed and traded securities in his and his family members’ personal brokerage accounts.
Motey, a former technology stock analyst, pleaded guilty and has been cooperating with the U.S. in its insider-trading investigations. He testified for the government in two insider- trading trials and secretly recorded more than 400 conversations for the Federal Bureau of Investigation in New York.
Motey testified against Doug Whitman, the founder of Whitman Capital LLC, and James Fleishman, a former executive for Primary Global Research LLC. Both Whitman and Fleishman were convicted after federal trials in New York. Motey was sentenced in February to time served.
The criminal case is U.S. v. Riley, 13-mag-00806, U.S. District Court, Southern District of New York (Manhattan). The SEC case is Securities and Exchange Commission v. Teeple, 13-cv- 02010, U.S. District Court, Southern District of New York (Manhattan).
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