Hedge fund managers in the U.S. and Europe did a good turn for the Securities and Exchange Commission, and helped uncover an attempt at insider trading involving an employee of Walt Disney & Co.
Hedge fund managers in the U.S. and Europe did a good turn for the Securities and Exchange Commission, and helped uncover an attempt at insider trading involving an employee of Walt Disney & Co.
The SEC announced today it has arrested an administrative assistant at Disney and her boyfriend, who apparently sent anonymous letters in March to more than 20 hedge funds in the U.S. and Europe containing insider info about Disney's financials.
In these letters, the duo offered an advance look at Disney's second-quarter earnings for a fee — in one case, a payment of $15,000 was suggested, and in the other they requested a portion of the trading proceeds.
The hedge fund managers quickly alerted SEC investigators, who then worked with the Federal Bureau of Investigation in a sting operation to catch the culprits.
The FBI arrested Bonnie Jean Hoxie and Yonni Sebbag today in California.
“Multiple hedge funds reported the illicit scheme, and the SEC and criminal law enforcement authorities acted quickly to stop this brazen attempt to establish an ongoing insider-trading business,” Robert Khuzami, director of the SEC's Division of Enforcement, said in a statement
Had the hedge funds accepted Ms. Hoxie's and Mr. Sebbag's offer, it appears they would have gotten some valuable information out of the deal.
The SEC complaint details that two days before Disney's earnings were to come out, Mr. Sebbag sent undercover FBI agents a document that Disney executives were going to use during the earnings conference call. Ms. Hoxie also learned the quarterly earnings per share, and provided it to an agent through Mr. Sebbag — about two hours before the earnings release was published.
The sting operation continued up to the point of money changing hands.
On May 14, an agent met Mr. Sebbag and gave him $15,000 in cash. Mr. Sebbag told the agent he wanted to “make a lot of money” out of the deal, and he also asked about how to set up an offshore account, the SEC complaint alleges. Mr. Sebbag and the agent planned to meet again so that the arrangement could continue.
The initial contacts with the hedge fund managers were unsophisticated at best, according to SEC findings, which revealed snippets of e-mails from Mr. Sebbag in unedited form.
"First of all, i am not a fed,” one read. “I have no way to prove it at this point but i am not asking you to disclose your identity not i will disclose mine. It is up to you to determine if this is worth the risk as i did. I work for Disney, that is all i can tell you."
“I dont think we will get caught if we stay discrete and careful. You can count on my discretion as i am counting on yours…"
