No Coat, No Tie Leads to Rough Start for Accused Insider Traderby
Afriyie on trial for allegedly ill-gotten gains on ADT options
Analyst at Michael Dell’s MSD Capital has deal-data access
On Monday, John Afriyie failed to show up at court for the start of his trial on insider-trading charges.
He refused to bring his expected court attire when U.S. marshals arrested him. When he finally arrived in federal court in Manhattan late Monday, dressed in Under Armour workout gear, he tried to fire his lawyers. On Tuesday, he listened in silence as a prosecutor laid out the evidence against him -- wearing a jacket, shirt, tie and pants that his mother brought him.
Thus began one of the more unusual insider-trading trials in recent memory in New York federal court. Afriyie, 29, attended Cornell University and worked as an analyst at Michael Dell’s MSD Capital LP. He’s accused of using confidential information gleaned from MSD’s computer system to score $1.5 million in illegal trading profits last year on Apollo Global Management LLC’s takeover of alarm-manufacturer ADT Security Services.
Prosecutors say Afriyie used a TD Ameritrade Holding Corp. brokerage account in his mother’s name to buy $25,000 of ADT call options that mushroomed into $1.5 million in profits, once news of the deal became public in February 2016 and ADT shares rose 50 percent.
MSD had been approached about providing financing for the Apollo-ADT deal. While Afriyie wasn’t assigned to work on it, he went fishing through the company computer systems to find the information, according to the government.
"Like a student who gets the answers in advance of an exam, Afriyie cheated by getting information the rest of the market didn’t have," Christine Magdo, an assistant U.S. attorney, told the jury in the government’s opening statement. "There wasn’t any risk to his investment. He already had tomorrow’s biggest news today."
Afriyie’s defense lawyers maintain the information in MSD’s computer systems was outdated and that the case didn’t amount to insider trading because the information was no longer material. A weak earnings statement from ADT and difficulty in securing deal financing created the risk that it wouldn’t be completed, and ultimately MSD didn’t extend funds, defense lawyer Susan Wolfe told the jury.
"John Afriyie was not making investments based on valuable inside information," Wolfe said. "He was gambling, pure and simple."
As his case has wound toward trial, Afriyie began exhibiting increasingly irrational behavior, which in the last week included refusing to talk to his lawyers and appearing to not understand his trial was about to begin, according to court papers.
Though he refused to come to court Monday, he also didn’t flee, and was apprehended at a Quality Inn in New Jersey where he has been staying. The defense team asked the judge to order a psychiatric evaluation -- citing an "absence of rational thinking" -- which the judge rejected.
U.S. District Court Judge Paul Engelmayer revoked Afriyie’s bail Monday when he was ultimately hauled into court late in the afternoon, and he is being confined at Metropolitan Correction Center -- currently also housing alleged Mexico drug kingpin “El Chapo" -- during his trial, which is expected to last into next week.
His mother brought him three pairs of slacks, one jacket, five shirts, four ties, seven pairs of socks, five pairs of underwear, a pair of shoes and a belt, to be kept at the jail to wear to court each day, according to court filings.
The case is USA v. Afriyie , 16-cr-00377, U.S. District Court, Southern District of New York (Manhattan).