Owner And Principal Of Investment Firm Indicted For Insider Trading

Geoffrey S. Berman, 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 today the indictment and arrest of DONALD BLAKSTAD for his participation in a scheme to trade on inside information that was misappropriated from Illumina, Inc. (“Illumina”), a San Diego-based biotechnology company whose stock trades on NASDAQ.  BLAKSTAD’s scheme yielded more than $6 million in illegal profits.

Mr. Berman also announced today the unsealing of charges against MARTHA BUSTOS, a certified public accountant formerly employed by Illumina, who pled guilty on June 28, 2019, and is cooperating with the Government.

BLAKSTAD was arrested this morning in San Diego, California, and will be presented today before United States Magistrate Judge William V. Gallo of the U.S. District Court for the Southern District of California.  In a separate action, the Securities and Exchange Commission (“SEC”) filed civil charges against BLAKSTAD and BUSTOS.

U.S. Attorney Geoffrey S. Berman said:  “Donald Blakstad allegedly used his connections to gather inside information that he and his associates then traded on, to the tune of more than $6 million in profits.  Trading stocks based on stolen information strikes at the foundation of our nation’s financial markets and today’s arrest and charges are part of our ongoing commitment to protecting the integrity of those markets.”

FBI Assistant Director-in-Charge Sweeney said:  “Those who base trading decisions on proprietary information they shouldn’t have access to are not only engaging in a practice that’s unfair, but also illegal.  Blakstad’s arrest today once again highlights the FBI’s ongoing efforts to eradicate this unlawful behavior and preserve the integrity of our financial markets.”

According to the allegations contained in the Indictment unsealed today[1]:

BLAKSTAD was the owner and principal of an investment fund known as Midcontinental Petroleum Inc., which purported to be in the business of soliciting investments in the oil and gas industry.  BUSTOS was a certified public accountant who worked in Illumina’s accounting department.  By virtue of her employment at Illumina, BUSTOS had access to material nonpublic information about Illumina’s financial condition, including its earnings.

On multiple occasions, from 2016 through 2018, BLAKSTAD obtained inside information about Illumina’s financial condition from BUSTOS before Illumina publicly announced its quarterly financial results.  As BLAKSTAD knew, BUSTOS owed a duty to keep inside information about Illumina confidential.

BLAKSTAD, aware of BUSTOS’s breach of duty to Illumina, used this inside information to make profitable trades in Illumina securities.  At times, BLAKSTAD tipped his associates so that they could trade Illumina stock and options based on the inside information.  At other times, in order to avoid detection, BLAKSTAD arranged for his associates to purchase Illumina securities for BLAKSTAD’s benefit in accounts controlled by his associates.

Following the public announcement of Illumina’s earnings, BLAKSTAD and his associates sold the Illumina securities at a significant profit, sometimes exceeding more than 2,000 percent.  In total, BLAKSTAD and his associates made more than $6 million in profits from purchasing and selling Illumina securities.

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BLAKSTAD, 60, of San Diego, California, is charged with the offenses set forth in the chart attached to this release. 

On June 28, 2019, BUSTOS, 31, of San Diego, California, pled guilty in Manhattan federal court before Magistrate Judge Gabriel W. Gorenstein to three counts: conspiracy to commit securities fraud, securities fraud, and conspiracy to commit wire fraud.  The maximum sentences for each charge are included in the attached chart.

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.

Mr. Berman praised the work of the FBI, and thanked the SEC for its assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward A. Imperatore and Brendan F. Quigley are in charge of the prosecution.

The allegations contained in the Indictment are merely accusations, and BLAKSTAD is presumed innocent unless and until proven guilty.