The SEC resolved two Galleon related insider trading cases. One involved Robert Feinblatt, a co-founder and former principal of hedge fund Trivium Capital Management LLC. SEC v. Feinblatt, Civil Action No. 11-CV-0170 (S.D.N.Y.). The other was against Anthony Scolaro, a former portfolio manager at hedge fund investment adviser Diamondback Capital Management, LLC. SEC v. Scolaro, Civil Action No. 11-CV-6112 (S.D.N.Y.).
The action against Mr. Feinblatt alleged that he and Jeffrey Yokuty, formerly an analyst who reported to him, traded in inside information in the shares of Polycom, Hilton, Google and Kronos. The two defendants obtained the inside information from Roomy Khan, a figure involved in other Galleon insider trading cases. Ultimately the information traced to Polycom senior executive Sunil Bhalla and Shammara Hussain, an employee at investor relations consulting firm Market Street Partners that did work for Google.
Mr. Feinblatt settled with the SEC by consenting to the entry of a permanent injunction enjoining him from future violations of Securities Act Section 17(a) and Exchange Act Section 10(b). Mr. Feinblatt also agreed to pay disgorgement of $829,765 along with prejudgment interest and a civil penalty of $1,659,530. In a separate administrative proceeding Mr. Feinblatt consented to be barred from the securities business with a right to reapply after five year. Mr. Yokuty previously settled with the SEC on similar terms while agreeing to pay disgorgement of $127,595.10 along with prejudgment interest and a civil penalty in an amount equal to the disgorgement. He also resolved a related administrative proceeding on similar terms but with a right to apply for reentry after three years.
The action against Mr. Scolaro ties to the Arthur Cutillo and Brien Santarias side of the Galleon investigation. Messrs. Cutillo and Santarias were formerly associates at the law firm of Ropes & Gray LLP. They misappropriated material, non-public information concerning the acquisition of Axcan from their firm. The information was furnished through another attorney to Zvi Goffer, a proprietary trader at broker dealer Schottenfeld Group LLC, who traded on it. Mr. Goffer then furnished the information to Franz Tudor, another trader at his firm who in turn provided it to his friend Mr. Scolaro who traded on behalf of hedge fund Diamondback yielding about $1.1 million in illegal profits.
Mr. Scolaro resolved the case with the SEC by consenting to the entry of a final judgment that permanently enjoins him from future violations of Exchange Act Section 10(b) and requires him to pay disgorgement of $125,980 along with prejudgment interest and a civil penalty of $62,945. Diamondback, named as a relief defendant, consented to the entry of an order requiring the payment of $962,486 in disgorgement along with prejudgment interest. Mr. Scolaro also consented to the entry of an order in an administrative proceeding barring him from the securities business. Previously he pleaded guilty to charges of conspiracy to commit securities fraud and securities fraud in a related criminal case. U.S. v. Scolaro, 11-CR-429 (S.D.N.Y.). He is awaiting sentencing.