Geoffrey S. Berman, United States Attorney for the Southern
District of New York, announced that MICHAEL SIVA, a former stock broker, was
sentenced today to eighteen months in prison for his involvement in an insider
trading scheme based on material, nonpublic information misappropriated from an
investment bank by Daniel Rivas, a former employee at the bank. SIVA pled guilty on October 18, 2018, to one
count of conspiracy to commit securities fraud and fraud in connection with a
tender offer before U.S. District Judge Alison J. Nathan, who also imposed
today’s sentence.
U.S. Attorney Geoffrey Berman said: “Michael Siva corrupted his position as a
stock broker to place trades in the accounts of his brokerage clients based on
inside information misappropriated from an investment bank. Siva committed insider trading to make
himself look like a talented stock selector.
The illegal trading by Siva resulted in millions in illicit
profits. This Office is committed to
identifying and prosecuting inside information-sharing networks that undermine
our nation’s securities markets.”
According to the Indictment, other filings in Manhattan
federal court, and statements made in court filings and proceedings:
In August 2017, SIVA, Roberto Rodriguez, Rodolfo Sablon,
Jhonatan Zoquier, and Jeffrey Rogiers were arrested and charged in a 54-count
Indictment for their involvement in three overlapping insider trading schemes,
generating more than $5 million in illicit profits, all stemming from
information misappropriated by Rivas.
Prior to the unsealing of the Indictment last year, Rivas and an
additional participant, James Moodhe, pled guilty and both have been
cooperating with the Government in this investigation. Since the unsealing of the Indictment, all of
the charged defendants have pled guilty.
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 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 Rivas-Moodhe-Siva Tipping Chain
SIVA was a member of the first of three tipping chains outlined
in the Indictment. In this tipping
chain, Rivas passed inside information to Moodhe, the father of the woman with
whom Rivas was living and dating. Moodhe
then passed the inside information to SIVA, a broker and financial adviser at a
global investment bank headquartered in Manhattan, New York. Moodhe and SIVA had known each other for more
than a decade and SIVA also became Moodhe’s broker.
Between 2015 and 2017, Moodhe shared with SIVA the inside
information he received from Rivas so that SIVA could execute profitable trades
on behalf of his financial advisory clients and himself. By at least early 2016, SIVA understood that
the source of the stock tips provided by Moodhe was a corporate insider at an
investment bank with whom Moodhe was friends.
In order to keep their scheme from being exposed, including
by SIVA’s employer, Moodhe and SIVA developed code phrases to use on the
telephone so that Moodhe could surreptitiously provide SIVA with updated inside
information. To further hide their
scheme, SIVA and Moodhe began going to various diners outside of New York City
so that Moodhe could provide stock tips to SIVA in person. During these meetings, Moodhe read from
pieces of paper provided to him by Rivas, which contained detailed information
about confidential impending deals, including ticker symbols, deal values and
expected announcement dates. In order to
hide the fact that SIVA was placing trades in his client accounts based on
illicit stock tips from Moodhe, SIVA also instructed Moodhe to mark his dirty
trades “solicited” in his firm’s online trading platform, so that it would
appear that SIVA had directed the trades as opposed to the suggestion coming
from Moodhe. On occasion, SIVA also
instructed Moodhe to wait to trade on a tip from Rivas until SIVA could first
trade in the security on behalf of his financial advisory clients, thereby
making it look like SIVA had originated the idea.
In total, between 2015 and 2017 SIVA and Moodhe used Inside
Information Rivas provided to trade ahead of the public announcements of more
than two dozen transactions, including numerous tender offers, allowing SIVA
and Moodhe to generate illicit profits in excess of $3 million. SIVA also earned thousands of dollars in commissions
on the illegal trades entered on behalf of his clients.
*
* *
In addition to the prison term, SIVA, 57, of Morristown, New
Jersey, was sentenced to 2 years of supervised release and ordered to forfeit
$35,000.
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
United States Attorneys Andrea M. Griswold and Samson Enzer are in charge of
the prosecution.
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