Florida Man Sentenced For $2 Million Insider Trading Scheme Based On Confidential Information Misappropriated From An Investment Bank

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced today that RODOLFO SABLON, a/k/a “Rudy,” was sentenced to six months in prison for his role in an insider trading scheme based on material nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank.  In July 2018, SABLON pled guilty to conspiracy to commit securities fraud and fraud before U.S. Magistrate Judge Debra Freeman.  U.S. District Judge Alison J. Nathan imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Today’s sentencing of Rodolfo Sablon closes the book on this multimillion-dollar, multi-pronged insider trading scheme.  Sablon and his co-defendants acted as though the securities laws that are designed to keep our nation’s marketplace fair did not apply to them.  However, as they all have learned, our office is committed to identifying and prosecuting these types of insider trading networks.”

According to the allegations contained in the Indictment filed against SABLON and his co-conspirators, and statements made in related court filings and proceedings:

The Investment Bank and Rivas

From August 2013 through May 2017, Rivas was employed as a technology consultant in the Research and Capital Markets Technology Group of an investment bank (the “Investment Bank”).  In this role, Rivas had access to an internal, proprietary system maintained by the Investment Bank (the “Deal Tracking System”) containing material nonpublic information (“Inside Information”) about potential and unannounced merger and acquisition transactions, including tender offers, involving the Investment Bank.  The Investment Bank’s written policies prohibited the unauthorized disclosure of confidential information, which included Inside Information.  Rivas had a duty, among other obligations, to maintain the confidentiality of all of the Investment Bank’s confidential information, including the Inside Information.

Overview of Insider Trading Schemes

From August 2014 through April 2017, Rivas violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material nonpublic information from the Investment Bank’s Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades.  On more than 50 occasions between August 2014 and April 2017, Rivas provided Inside Information about contemplated but unannounced merger and acquisition (“M&A”) transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities.  In total, the insider trading based on Inside Information misappropriated by Rivas resulted in illicit profits of more than $5 million through trading in more than two dozen securities.  The Inside Information was passed through three tipping chains.   

The Sablon Tipping Chain

SABLON was a member of the second of three tipping chains outlined in the Indictment.  In this tipping chain, Rivas passed inside information to SABLON and co-defendant Roberto Rodriguez, a childhood friend of Rivas with whom Rodriguez had maintained a close relationship as adults.

Since 2014, Rodriguez lived and worked in Miami, Florida, with SABLON, with whom he was also friends.  In 2015, Rodriguez introduced Rivas to SABLON.  Rivas and SABLON then communicated with each other directly and developed an independent relationship.

In the fall of 2015, Rivas disclosed to Rodriguez that Rivas had access to Inside Information by virtue of his position as a corporate insider at an Investment Bank.  At Rodriguez’s request, Rivas also agreed to share Inside Information with SABLON.  While Rivas had originally agreed to divulge Inside Information to Rodriguez because of their history of friendship, Rivas also learned that Rodriguez and SABLON intended to start an investment fund with the proceeds of the insider trading scheme.  Rivas understood that in exchange for the Inside Information Rivas was providing to Rodriguez and SABLON, Rivas would be invited to join the investment fund as a partner once it was successfully launched.

At first, Rivas communicated with Rodriguez and SABLON primarily via phone and text message.  As the scheme progressed, however, Rodriguez and SABLON increased their efforts to hide their illegal activity.  On several occasions, Rivas met personally with Rodriguez and/or SABLON in Miami in order to provide them with Inside Information.  Rivas also provided Rodriguez and SABLON with Inside Information using an encrypted mobile messaging application (the “Messaging App”), which allows users to set a timer to messages to irretrievably “self-destruct.”

In order to maximize the illicit profits that could be earned using Rivas’s Inside Information, Rodriguez and SABLON, in consultation with Rivas, initiated an aggressive strategy of purchasing short-term, out-of-the money call options.  In total, from 2015 through April 2017, Rodriguez and SABLON earned more than $2 million in illicit profits through insider trading in more than two dozen securities based on Inside Information divulged by Rivas.

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In addition to the prison term, SABLON, 39, of Miami, Florida, was sentenced to two years of supervised release, including six months in a community confinement center.  SABLON was also ordered to pay $923,566 in forfeiture and a $5,000 fine.

Co-defendant Siva pled guilty on October 18, 2018, to one count of conspiracy to commit securities fraud and fraud and was sentenced to 18 months in prison on February 22, 2019.  Co-defendant Rodriguez pled guilty on September 7, 2018, to conspiracy to commit securities fraud and fraud and was sentenced to one year and one day in prison.  Co-defendant Jhonatan Zoquier pled guilty on August 6, 2018, to conspiracy to commit securities fraud and was sentenced to three months in prison.  Co-defendant Jeffrey Rogiers pled guilty on August 13, 2018, to conspiracy to commit securities fraud and was sentenced to three months in prison.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for their assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Andrea M. Griswold and Samson Enzer are in charge of the prosecution.