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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23302 / July 13, 2015

Securities and Exchange Commission v. Frank Tamayo, Civil Action No. 3:14-cv-05844-MAS-TJB

SEC Announces Settlement with Cooperator in Grand Central Post-It Notes Insider Trading Case

The Securities and Exchange Commission today announced a settlement with a Brooklyn man who entered into a cooperation agreement to help the agency mount evidence in an insider trading scheme in which illegal tips were passed via napkins or post-it notes at Grand Central Terminal.

The SEC last year charged a law firm clerk and a stockbroker with insider trading in a scheme that used a mutual friend to pass material, nonpublic information from the law firm's computer systems about clients' pending corporate transactions. The SEC identified that middleman as Frank Tamayo in a subsequent complaint filed in federal court in New Jersey. The SEC alleged that after receiving the tips from the law firm clerk, Tamayo typically met the stockbroker near the clock at the information booth at Grand Central and chewed up or ate post-it notes or napkins after using them to show the stockbroker the ticker symbol of the company that would be acquired. The stockbroker then traded for himself, Tamayo, and other customers.

For his extensive cooperation in the SEC's investigation, Tamayo will not face a monetary penalty from the SEC. In the proposed final judgment, which is subject to court approval, Tamayo would be ordered to disgorge more than $1 million of his ill-gotten gains from the scheme, but that payment would be deemed satisfied by the entry of orders of forfeiture or restitution in the parallel criminal case, in which he has pled guilty. Tamayo also would be permanently enjoined from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rule 10b-5 and 14e-3 thereunder, as well as Section 17(a) of the Securities Act of 1933.

Under the terms of the agreement, Tamayo must continue to cooperate as a witness in the SEC's ongoing case against the law firm clerk Steven Metro of Katonah, N.Y. and the stockbroker, Vladimir Eydelman of Colts Neck, N.J. The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and injunctions against them.

The SEC's investigation was conducted by Jason Burt and Carolyn Welshhans in the Enforcement Division's Market Abuse Unit with assistance from John Rymas, Mathew Wong, Daniel Koster, and Leigh Barrett. The case was supervised by Daniel M. Hawke, Chief of the Market Abuse Unit, and Robert A. Cohen, the unit's co-Deputy Chief. The SEC's litigation is being led by Stephan Schlegelmilch. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of New Jersey, Federal Bureau of Investigation, and Financial Industry Regulatory Authority.

 

http://www.sec.gov/litigation/litreleases/2015/lr23302.htm


Modified: 07/13/2015