Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing today of a 15-count superseding indictment charging DOV MALNIK and TOMER FEINGOLD with offenses relating to their roles as securities traders in a wide-ranging international insider trading ring who made millions of dollars in illicit profits by trading based on misappropriated inside information. MALNIK, a citizen of Israel and Lithuania, was arrested in Switzerland on October 7, 2020, was extradited on June 10, 2021, from Switzerland, and pled guilty today before U.S. Magistrate Judge Stewart D. Aaron. FEINGOLD remains at large. The case is assigned to U.S. District Judge Victor Marrero.
Manhattan U.S. Attorney Audrey Strauss said: “Today’s charges represent another step in our Office’s pursuit of transnational insider trading. Our Office, along with the FBI and our other law enforcement partners, will vigorously protect the integrity of our nation’s capital markets, regardless of where in the world the inside information is stolen and where tips are illegally passed.”
FBI Assistant Director William F. Sweeney Jr. said: “Whether it happens inside or outside our borders, trading securities based on misappropriated insider information that affects our financial markets in any way will ultimately lead to federal criminal charges here in the U.S. Protecting the integrity of our markets from threats both at home and abroad remains a top priority of our white collar crime division.”
As alleged in the Indictment unsealed today in Manhattan federal court:
DOV MALNIK, a citizen of Israel and Lithuania, and TOMER FEINGOLD, a citizen of Israel, were business partners and securities traders who traded in their own names and managed various companies and investment funds. From at least 2013 through 2017, MALNIK and FEINGOLD participated in a large-scale, international insider trading ring. Through the scheme, MALNIK and FEINGOLD received material, nonpublic information (“MNPI”) concerning acquisitions and potential acquisitions of publicly traded companies from a securities trader who resided in Switzerland (“CC-1”). MALNIK and FEINGOLD both knew that this MNPI was obtained by CC-1 directly and indirectly from individuals who were insiders at publicly traded companies and investment banks. These insiders breached their fiduciary duties and shared MNPI with others, including CC-1, in exchange for compensation, who in turn shared that information with MALNIK and FEINGOLD. MALNIK and FEINGOLD used that information to place timely, profitable securities trades resulting in millions of dollars of profits.
MALNIK and FEINGOLD began obtaining MNPI from CC-1 in approximately 2013. During that summer, CC-1 met MALNIK and FEINGOLD and explained to them that CC-1 had numerous sources of MNPI and CC-1 could share that MNPI with MALNIK and FEINGOLD. In return, MALNIK and FEINGOLD agreed to compensate CC-1 by buying additional securities on CC-1’s behalf and transmitting the profits from those trades to CC-1. Soon after meeting MALNIK and FEINGOLD, CC-1 explained to them the importance of CC-1 being paid CC-1’s share of the profits in cash because CC-1 needed cash to pay his sources of MNPI. MALNIK and FEINGOLD agreed to this arrangement and obtained MNPI about numerous companies from CC-1. Specifically, CC-1 obtained MNPI which was subsequently shared with MALNIK and FEINGOLD from numerous sources, including MNPI that was stolen by investment bank insiders from two different global investment banks.
Throughout the conspiracy, MALNIK and FEINGOLD, as well as the investment bank insiders, CC-1, and others involved in this scheme, took numerous steps to conceal their unlawful enterprise, including through the use of encrypted messaging applications and multiple unregistered “burner” cellphones to communicate with each other. MALNIK and FEINGOLD also attempted to avoid detection by engaging in securities trading through numerous offshore corporate entities. For example, in 2011, MALNIK incorporated a British Virgin Islands entity based in Geneva, Switzerland, and subsequently opened trading and/or bank accounts in that shell company’s name. During the insider trading scheme, MALNIK and FEINGOLD’s offshore companies traded in the stocks of companies about which MALNIK and FEINGOLD had received MNPI – often with multiple of those companies trading in the same stock and on the same days.
MALNIK and FEINGOLD also used these entities to transfer a portion of the profits of their illegal insider trading to CC-1 as per MALNIK and FEINGOLD’s agreement with CC-1. At first, MALNIK and FEINGOLD instructed their banks to send the funds to an account at a financial institution in Switzerland that agreed to hold the funds for the benefit of CC-1. After a short time, however, MALNIK and FEINGOLD’s banks questioned the purpose of the transactions and requested justification for the transfer of funds. Accordingly, in order to deceive the banks, MALNIK, FEINGOLD, and CC-1 agreed that CC-1 would issue fake invoices for consulting services to MALNIK and FEINGOLD’s various offshore entities. The offshore entities would then send the funds to CC-1’s account pursuant to the fake invoices.
To date, the investigation has also resulted in the conviction of other individuals who were involved in this global insider trading scheme, including investment banker Bryan Cohen, who pled guilty on January 7, 2020, to illegally passing MNPI related to his bank’s corporate clients, and entrepreneur and pharmaceutical company executive Telemaque Lavdias, who was convicted on January 15, 2020, of illegally passing MNPI related to Ariad Pharmaceuticals, Inc.
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MALNIK, 43, an Israeli and Lithuanian citizen and resident of Switzerland, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison. Sentencing before Judge Marrero will take place on a date to be determined.
FEINGOLD, 42, an Israeli citizen, is charged with conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of 25 years in prison; securities fraud under Title 15, which carries a maximum sentence of 20 years in prison; tender offer fraud, which carries a maximum sentence of 20 years in prison; wire fraud, which carries a maximum sentence of 20 years in prison; securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and money laundering, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Ms. Strauss praised the investigative work of the FBI and also thanked the Securities and Exchange Commission for its assistance. Ms. Strauss also thanked the Office of International Affairs of the Department of Justice’s Criminal Division and the Swiss Federal Office of Justice for their assistance in the arrest and extradition of MALNIK.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Richard Cooper and Daniel Tracer are in charge of the prosecution.
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