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SEC Sues Schottenfeld Trader Mancuso Over Goffer Tips

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April 18 (Bloomberg) -- The U.S. Securities and Exchange Commission sued Joseph Mancuso, a former trader at Schottenfeld Group LLC, accusing him of making about $350,000 on a series of illegal tips from Zvi Goffer, a former Galleon Group LLC trader.

Mancuso, 36, of Manhattan, worked with Goffer when both men were at Schottenfeld, and was described by regulators as Mancuso’s “good friend and colleague.” Goffer shared tips with him about nonpublic information about the acquisition of Avaya Inc., 3Com Corp., Axcan Pharma Inc., Hilton Hotels Corp. and Kronos Inc., the SEC said in a complaint filed yesterday in federal court in Manhattan.

“Mancuso, by virtue of his close personal and professional relationship with Zvi, was a regular recipient of Zvi’s tips,” the SEC alleged. “So close was the relationship between Mancuso and Zvi, who had been friends since they met in college in the mid-1990s, that Mancuso earned the nickname ‘mini Zvi’ among his colleagues at Schottenfeld.”

Goffer obtained the information leaked by two Ropes & Gray LLC lawyers Brien Santarlas and Arthur Cutillo about the firm’s clients, which he passed on to his friends, the SEC said. Goffer also paid kickbacks to the two lawyers in exchange for the inside information. Prosecutors said Goffer and others to whom he passed the information earned $10 million.

Swapped Tips

The group of a dozen people who the SEC said provided and swapped tips with Goffer included Roomy Khan, 54, a former Intel Corp. executive who also worked for Galleon Group LLC co-founder Raj Rajaratnam; Franz Tudor, another former Galleon trader who obtained information from Goffer, and Thomas Hardin, a former analyst at Lanexa Global Management LP.

By trading on Goffer’s tips about Avaya, Axcan, 3Com and Kronos, Mancuso earned more than $261,000, the SEC said. Another series of Hilton trades based on tips Goffer provided, earned him about $134,250, the SEC said.

“We look forward to presenting a vigorous defense,” Justin Sher, a lawyer for Mancuso, said.

Goffer is serving a 10-year prison term after being convicted in 2011 of 14 counts of conspiracy and securities fraud. Santarlas was sentenced to six months in prison while Cutillo received a 30-month sentence. Khan was sentenced to serve a one-year prison term while Tudor was sentenced to three years’ probation for his cooperation.

The case is SEC v. Mancuso, 13-cv-02555, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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