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Saturday, February 22, 2020

Hedge firm pays $21.5M to settle SEC insider trading charges

By Stephanie Ostrowski | May 2, 2013


WASHINGTON (Legal Newsline) - Hedge fund advisory firm Level Global Investors LP has agreed to pay more than $21.5 million to settle charges for alleged insider trading in the securities of Dell Inc. and Nvidia Corp.

Former analyst Spyrdon "Sam" Adondakis was a member of a group of closely associated hedge fund analysts. Adondakis illegally obtained highly sensitive information on revenues and profit margins for Dell and Nvidia before it was made public, according to the Securities and Exchange Commission's (SEC) complaint filed in Manhattan federal court.

The financial information revealed sometimes indicated the quarterly results from the company would differ significantly from the consensus expectations of Wall Street analysts.

During 2008 to 2009, Adondakis passed the confidential information on to Level Global Investors co-founder Anthony Chiason, who then used it to execute trades on behalf of the hedge funds managed by the firm. As a result, millions of dollars in illegal profits were made, according to the claim announced Monday.

Following news reports of a government investigation Level Global, which once managed as much as $4 billion, announced it would close the firm and the return of all investors' money which is still currently in process, according to the SEC.

In Jan. 2012 the SEC filed insider trading charges against Chiasson, Adondakis and six other defendants, including five investment professionals and the hedge fund advisory firm Diamondback Capital Management.

"The insider trading at Level Global was hardly an isolated event - it occurred repeatedly, and involved multiple companies and multiple quarterly announcements," said Sanjay Wadhwa, Senior Associate Director of the SEC's New York Regional Office. "This settlement serves as another reminder that the SEC will hold hedge fund managers accountable when their employees violate the securities laws."

The settlement, while still subject to court approval, requires the firm to disgorge $10,082,725 in fees that resulted in the alleged insider-trading scheme and pay another $10,082,725 penalty. Level Global must also pay prejudgment interest of $1,348,824.
Level Global has also agreed to the entry of an order permanently banning the firm from future violations of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and Section 17(a) of the Securities Act of 1933.

Level Global neither admits nor denies the SEC's allegations.

Previously Adondakis pleaded guilty to parallel criminal charges and agreed to a settlement with the SEC in which he admitted to insider trading.

The SEC continues to pursue its insider trading claims against Chiasson, who was convicted in December 2012 of securities fraud in a parallel criminal proceeding.

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