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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23650 / September 21, 2016

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

Middleman in Post-It Note Insider Trading Case Sentenced to a Year and a Day in Prison

Frank Tamayo, a former mortgage broker and middleman in a long-standing insider trading scheme, was sentenced today to a year and a day in federal prison.

On September 19, 2014, Tamayo pleaded guilty to criminal charges arising from his role in an insider trading scheme that involved trading in advance of more than a dozen pending corporate transactions. Tamayo obtained material, nonpublic information relating to these transactions from an employee of Simpson Thacher, Steven Metro. Tamayo then passed on these tips to his stockbroker, Vladimir Eydelman, who traded on the basis of the information. The illegal trading resulted in approximately $5.6 million in profits.

The SEC's complaint alleged that after receiving the tips from Metro, Tamayo typically met Eydelman near the clock at the information booth at Grand Central Terminal, and then chewed up or ate the post-it notes or napkins after using them to show Eydelman the ticker symbol of the company that would be acquired. The SEC alleged that Eydelman then returned to his office and typically gathered research about the target company, which he emailed to Tamayo to create a false paper trail with a justification for the trading. Eydelman then allegedly traded for himself, Tamayo, and other customers. Tamayo allegedly allocated a portion of his profits for eventual payment back to Metro in exchange for the inside information, and Metro also traded personally in advance of at least two deals.

Eydelman and Metro also pleaded guilty in connection with their roles in the scheme, and both Tamayo and Eydelman previously entered into settlements with the SEC pursuant to which each consented to being 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. Additionally, the settlements require Tamayo to disgorge more that $1 million of his ill-gotten gains, and Eydelman to disgorge $1,236,657 of his ill-gotten gains and pay a monetary penalty of $1,236,657. Eydelman was also barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally statistical rating organization; and barred from participating in any offering of a penny stock.

Metro was sentenced on September 14, 2016, to 46 months in prison. Eydelman has not yet been sentenced.

The SEC's litigation against Metro is ongoing. The SEC's complaint seeks disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and an anti-fraud injunction.

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 Robert A. Cohen, Co-Chief of the Market Abuse Unit. 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.

For additional information, see Litigation Release Numbers 23302, , and 23646.

 

http://www.sec.gov/litigation/litreleases/2016/lr23650.htm


Modified: 09/21/2016