The SEC’s losing streak in high profile insider trading cases continues. Last week, a federal jury in Santa Ana, California, cleared Manouchehr Moshayedi of insider trading. Mr. Moshayedi is the founder of STEC Inc., a company that makes computer storage devices. The SEC claimed that Mr. Moshayedi traded on inside information when he sold a large portion of his stock holdings in STEC with knowledge that one of his major customers wanted far fewer computer storage devices. The SEC contended that Mr. Moshayedi’s actions allowed him to deceive shareholders to the tune of $267 million. The case was one of the highest dollar figure SEC insider trading cases to ever go to trial.
The Moshayedi verdict comes on the heels of another big SEC trial loss seven days earlier in New York. In that case, the SEC had accused Nelson Obus, a hedge fund manager at Wynnefield Capital, with taking part in a $1.3 million insider trading scheme. In both defeats, it only took the jury less than one day to return their verdicts. Both cases were civil actions and the standard of proof the SEC had to meet was a preponderance of the evidence, rather than beyond a reasonable doubt.
The Obus and Moshayedi losses follow other recent SEC high profile trial losses, including a suit against Dallas Mavericks owner Mark Cuban (the defense of Cuban was handled by Fish) and a former Citigroup executive Brian Stoker. Following the Moshayedi trial loss, a SEC spokesman said that the SEC would continue to aggressively enforce the law when it believed that the evidence supported the allegations.
These high profile losses will surely mean many more defendants will put the SEC to test at trial. Stay tuned.