SEC obtains final judgments on consent against Diamondback
The Honourable Harold Baer, Jr, United States District Judge, United States District Court for the Southern District of New York, entered a Final Judgment on Consent as to Diamondback Capital Management LLC on 6 April, 2012, in the SEC’s insider trading case, SEC v. Spyridon Adondakis et al., Civil Action 12-CV-0409 (SDNY) (HB).
The SEC filed its complaint on 18 January, 2012, charging two multi-billion dollar hedge fund advisory firms – including Diamondback – as well as seven fund managers and analysts involved in a USD78 million insider trading scheme based on nonpublic information about Dell’s quarterly earnings and other similar inside information about Nvidia Corporation.
The SEC’s complaint alleged that in 2008 and 2009, Jesse Tortora, an analyst at Diamondback, obtained inside information about quarterly earnings reports of both Dell and Nvidia and passed that information to Todd Newman, a Diamondback portfolio manager, who used the information to execute trades on behalf of hedge funds managed by Diamondback. These illegal trades in Dell and Nvidia securities resulted in millions of dollars in illicit gains for Diamondback.
The Final Judgment against Diamondback: (1) permanently enjoins the firm from violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Exchange Act Rule 10b-5; and (2) orders it to pay disgorgement of USD5,173,000 plus pre-judgment interest of USD832,751.35, for a total of USD6,005,751.35, provided that the amount Diamondback owes would be credited, dollar for dollar, by amounts paid pursuant to a non-prosecution agreement between Diamondback and the US Attorney’s Office for the Southern District of New York; and (c) orders it to pay a civil penalty in the amount of USD3,000,000.
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