WASHINGTON/NEW YORK: The US government filed criminal and civil charges accusing a former executive of insider trading in advance of eBay Inc’s purchase of his e-commerce company.
The case against Christopher Saridakis, 45, is also notable because it marks the first time the US Securities and Exchange Commission reached a so-called “non-prosecution” agreement with an individual, an unnamed trader who it said provided “early, extraordinary and unconditional” cooperation.
Federal prosecutors in Philadelphia charged Saridakis, who led the marketing solutions division of GSI Commerce Inc, in a so-called criminal information with securities fraud for leaking material nonpublic information in March 2011 about eBay’s plan to buy his company. Investigators said the resident of Greenville, Delaware, encouraged two relatives and two friends to trade on his tips, leading to more than $300,000 of illegal profits.
GSI shares rose nearly 51 percent on March 28, 2011, after eBay, the online retailer, announced its $1.96bn purchase of the King of Prussia, Pennsylvania-based company.
The SEC said Saridakis agreed to pay $664,822 and accept an officer and director ban to settle its charges. The cooperating defendant and five other people agreed to pay more than $490,000 to settle related SEC charges. Three of these defendants got lessened penalties because they cooperated with the regulator.
The US Department of Justice has long used deferred prosecution and non-prosecution agreements to encourage and reward cooperation in criminal investigations, and the SEC in January 2010 said it would also use them in its civil probes. “Although Saridakis’ tips spun a web of illegal trading, some of the downstream tippees substantially assisted in our investigation while others hindered it,” Andrew Ceresney, head of the SEC’s enforcement division, said in a statement.
“The reduction in penalties for those tippees who assisted us, together with the non-prosecution agreement for one of the traders, demonstrate the benefits of cooperating with our investigations,” he added. “The increased penalties for others highlight the risks of impeding our work.”
Saridakis could face up to 20 years in prison and a $5m fine if convicted in the criminal case, prosecutors said.
Richard Zack, a partner at Pepper Hamilton representing Saridakis, said: “Chris accepts full responsibility for his conduct in this matter, and has done everything he can to make the situation right. He will continue to do so. He deeply regrets the effect of his mistake on his family and friends.”
According to the SEC, Saridakis tipped his friends Jules Gardner, a retired marketing executive, and Suken Shah, a doctor, about the eBay acquisition. Reuters
