SEC charges Wall Street professionals in USD11.6m insider trading ring

SEC charges Wall Street professionals in USD11.6m insider trading ring

The SEC has alleged that two M&A professionals, Nicos Achilleas Stephanou at UBS Investment Bank and Ramesh Chakrapani at Blackstone Advisory Services, tipped five individuals including Joseph Contorinis, a portfolio manager for a Jefferies Group hedge fund, with material non-public information about three impending corporate acquisitions.

The Securities and Exchange Commission has charged the seven individuals for their alleged involvement in an insider trading ring that generated more than USD11.6m in illegal profits and avoided losses.

"The Commission and the public expect Wall Street professionals to act with the highest degree of ethics and integrity. It is unconscionable when these highly paid individuals abuse their access to sensitive information and enrich themselves at the expense of others," says Scott W. Friestad, deputy director of the SEC's division of enforcement. "As today's actions demonstrate, we are aggressively working to combat insider trading wherever it occurs and whoever is involved."

According to the SEC's complaint, the insider trading ring included: Stephanou, a resident of the UK, an associate director of mergers and acquisitions at UBS Investment Bank; Chakrapani, a resident of the UK, a managing director in the corporate and mergers and acquisitions group at Blackstone Advisory Services and a friend and former colleague of Stephanou; Contorinis, a resident of Florida, a managing director at Jefferies & Company and portfolio manager for the Jefferies Paragon Fund, and a friend and former colleague of Stephanou; Achilleas Stephanou, a resident of Cyprus, Nico Stephanou's father; George Paparrizos, a resident of Foster City, Calif., a former classmate of Nicos Stephanou; Konstantinos Paparrizos, a resident of Greece, the father of George Paparrizos; and Michael G. Koulouroudis, a resident of Brooklyn, N.Y., a close family friend of Nicos Stephanou.

Related criminal charges by the US Attorney's Office for the Southern District of New York were unsealed against Koulouroudis, Contorinis, Nicos Achilleas Stephanou, and George Paparrizos.

The SEC's complaint alleges that the illicit trading occurred from at least November 2005 through December 2006.

One incidence occurred on 23 January 2006, when prior to the opening of trading, ABS issued a press release announcing the acquisition of ABS by a consortium of buyers at USD26.29 per share.

Nicos Stephanou had access to material non-public information concerning the acquisition of ABS prior to its public release because one of the companies that eventually acquired ABS retained UBS as its financial adviser and Stephanou was a member of the team at UBS that advised the company on the acquisition.
Nicos Stephanou tipped George Paparrizos, Koulouroudis and Contorinis with material non-public information about the ABS acquisition, all of whom traded on the basis of that information. Nicos Stephanou also either tipped his father, Achilleas Stephanou, or in an effort to evade detection, Stephanou traded ABS securities in his father's brokerage account. In addition, Nicos Stephanou either tipped Konstantinos Paparrizos or, in an effort to evade detection, George Paparrizos traded ABS securities in his father's account.

In particular, after receiving the non-public information from Nicos Stephanou, Contorinis caused the Jefferies Paragon Fund to purchase over 2.6 million shares of ABS at a cost of USD59m.

By virtue of their trading in ABS securities, the defendants made total profits and avoided losses of approximately USD7.7m.

Another incidence occurred on 18 December 2006 when prior to the market open, ELK publicly announced that it had agreed to be acquired by The Carlyle Group for USD38.00 per share.

ELK hired UBS as its financial adviser. Through working on the deal himself, through communications with other employees at UBS who advised ELK on the acquisition, and/or by virtue of his access to UBS' internal files, Nicos Stephanou had access to material nonpublic information regarding ELK's impending acquisition.

Nicos Stephanou tipped George Paparrizos and Koulouroudis with material nonpublic information about the ELK acquisition. George Paparrizos and Koulouroudis traded on the basis of that information.

Nicos Stephanou also either tipped his father, Achilleas Stephanou or, in an effort to evade detection, traded ABS in his father's brokerage account. In addition, Nicos Stephanou either tipped Konstantinos Paparrizos or, in an effort to avoid detection, George Paparrizos traded ELK securities his in father's account.

By virtue of this trading in ELK securities, Achilleas Stephanou, George Paparrizos, Konstantinos Paparrizos and Koulouroudis and his family members made total profits of approximately USD300,000.

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