December 4, 2013 — Many who work in the financial and securities industries frequently learn about confidential insider information that could be misused to turn a personal profit. Trading on material, nonpublic information, however, is a crime. To tackle the problem of illegal insider trading, the U.S. Congress established a whistleblower program, as outlined in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010. Informants who notify the Securities and Exchange Commission (SEC) about illegal insider trading may be rewarded for their courage in collaborating with the SEC. Whistleblowers could receive rewards equivalent to thirty percent of the amount the government receives, so long as the recovery exceeds $1 million.
Brothers from Brazil Identified as Participants in Insider Trading Scam Involving Berkshire Hathaway Acquisition of Heinz
Two brothers in Brazil have consented to pay almost $5 million to resolve SEC charges that they played a role in suspicious call-option trading the day before H.J. Heinz announced publicly that it would be acquired by Berkshire Hathaway and 3G Capital. Earlier this year, the SEC obtained a freeze of assets in a Swiss-based account that traders had used to generate over $1.8 million from insider trading prior to the Heinz announcement. The SEC then began investigating the source of the trades.
According to the SEC, Rodrigo Terpins made the purchase order for the Heinz options during a Disney World vacation in Orlando, based on non-public information passed on to him by his brother, Michel Terpins. Terpins executed the trades through Alpine Swift, the account of a Cayman Islands entity that holds assets for one of the Terpins brothers’ family members. Terpins purchased 2,533 out-of-the-money calls, betting that Heinz’s stock would go up in value around five dollars per share. Because the trade went through an omnibus account at the Zurich office of Goldman Sachs’ Zurich office, the identity of Rodrigo Terpins was hidden. The omnibus account reflected only the combined positions of Goldman Sachs and its underlying customers, without revealing the names of the individual owners or customers. Rodrigo Terpins spent almost $90,000 to buy Heinz option positions, which increased in value by close to 2,000 percent the following day once news of the Heinz acquisition became public.
According to the SEC, the Terpins brothers have consented to disgorge all of the $1.8 million in illegal profits and to pay an additional $3 million in penalties.
Whistleblowers Notify Government of Insider Trading
Employees with brokerage firms and other entities in the financial industry should understand the Dodd-Frank whistleblower process before speaking out. The SEC fraud lawyers at Waters & Kraus have the experience it takes to protect whistleblowers’ rights in insider trading cases. Contact us by email or phone our securities fraud lawyers at 855.784.0268 to discuss how we can help you do the right thing.
