Florida Man Sentenced To One Year In Prison For Insider Trading Scheme Based On Confidential Information Misappropriated From An Investment Bank

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that ROBERTO RODRIGUEZ was sentenced today one year and one day in prison for his involvement in an insider trading scheme based on material, nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank.  RODRIGUEZ pled guilty on September 7, 2018, to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer before Magistrate Judge Henry B. Pitman.  His plea was thereafter accepted by U.S. District Judge Alison J. Nathan, who also imposed today’s sentence.

U.S. Attorney Geoffrey Berman said:  “Roberto Rodriguez reaped millions of dollars trading on confidential corporate information stolen by a longtime friend at an investment bank.  Our Office is committed to identifying and prosecuting insider trading networks that undermine our nation’s securities markets.”

According to the Indictment, other filings in Manhattan federal court, and statements made in court filings and proceedings:

In August 2017, RODRIGUEZ, Michael Siva, Rodolfo Sablon, Jhonatan Zoquier, and Jeffrey Rogiers were arrested and charged in a 54-count Indictment for their involvement in three overlapping insider trading schemes, generating more than $5 million in illicit profits, all stemming from information misappropriated by Rivas.  Prior to the unsealing of the Indictment last year, Rivas and an additional participant, James Moodhe, pled guilty and both have been cooperating with the Government in this investigation.  Since the unsealing of the Indictment, all of the charged defendants have pled guilty. 

The Investment Bank and Rivas

From August 2013 through May 2017, Rivas was employed as a technology consultant in the Research and Capital Markets Technology Group of an investment bank (the “Investment Bank”).  In this role, Rivas had access to an internal, proprietary system maintained by the Investment Bank (the “Deal Tracking System”) containing material, nonpublic information (“Inside Information”) about potential and unannounced merger and acquisition transactions, including tender offers, involving the Investment Bank.  The Investment Bank’s written policies prohibited the unauthorized disclosure of confidential information, which included Inside Information.  Rivas had a duty, among other obligations, to maintain the confidentiality of all of the Investment Bank’s confidential information, including the Inside Information. 

Overview of Insider Trading Schemes

From August 2014 through April 2017, Rivas violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material, nonpublic information from the Investment Bank’s Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades.  On more than 50 occasions between August 2014 and April 2017, Rivas provided Inside Information about contemplated but unannounced merger and acquisition transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities.  In total, the insider trading based on Inside Information misappropriated by Rivas resulted in illicit profits of more than $5 million through trading in more than two dozen securities. The Inside Information was passed through three tipping chains.   

The Rodriguez Tipping Chain

RODRIGUEZ was a member of the second of three tipping chains outlined in the Indictment.  In this tipping chain, Rivas passed inside information to RODRIGUEZ, a childhood friend of Rivas with whom Rodriguez had maintained a close relationship as adults, and Sablon.

Since 2014, RODRIGUEZ lived and worked in Miami, Florida, with Sablon, with whom he was also friends.  In 2015, RODRIGUEZ introduced Rivas to Sablon.  Rivas and Sablon then communicated with each other directly and developed an independent relationship.

In the fall of 2015, Rivas disclosed to RODRIGUEZ that Rivas had access to Inside Information by virtue of his position as a corporate insider at the Investment Bank.  At RODRIGUEZ’s request, Rivas also agreed to share Inside Information with Sablon.  While Rivas had originally agreed to divulge Inside Information to RODRIGUEZ because of their history of friendship, Rivas also learned that RODRIGUEZ and Sablon intended to start an investment fund with the proceeds of the insider trading scheme.  Rivas understood that in exchange for the Inside Information Rivas was providing to RODRIGUEZ and Sablon, Rivas would be invited to join the investment fund as a partner once it was successfully launched.

At first, Rivas communicated with RODRIGUEZ and Sablon primarily via phone and text message.  As the scheme progressed, however, RODRIGUEZ and Sablon increased their efforts to hide their illegal activity.  On several occasions, Rivas met personally with RODRIGUEZ and/or Sablon in Miami in order to provide them with Inside Information.  Rivas also provided RODRIGUEZ and Sablon with Inside Information using an encrypted mobile messaging application, which allows users to set a timer to messages to irretrievably “self-destruct.”

In order to maximize the illicit profits that could be earned using Rivas’s Inside Information, RODRIGUEZ and Sablon, in consultation with Rivas, initiated an aggressive strategy of purchasing short-term, out-of-the money call options.  In total, from 2015 through April 2017, RODRIGUEZ and Sablon earned more than $2 million in illicit profits through insider trading in more than two dozen securities based on Inside Information divulged by Rivas.

*                *                *

In addition to the prison term, RODRIGUEZ, 34, of Miami, Florida, was sentenced to two years of supervised release.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for their assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant United States Attorneys Andrea M. Griswold and Samson Enzer are in charge of the prosecution.