USAO Secures Guilty Plea in Serial Insider Trading Ring Case

Insider trading has long been a staple of the Commission’s Enforcement Division and the Manhattan U.S. Attorney’s Office. Together the two agencies have been responsible for a long series of insider trading actions. One is U.S. v. Silva, No. 1:17-cr-00503 (S.D.N.Y.), a case based on a serial insider trading ring that has been responsible for illegal insider trading in over two dozen securities involving at least 50 instances and which has generated over $5 million in illegal profits. The scheme is outlined in a 54 count indictment. One of the Defendants named in the indictment is Robert Rodriguez.

Daniel Rivas, the lynchpin of the ring, was employed at a New York investment bank. From August 2013 through May 2017 Mr. Rivas worked as a technology consultant in the research and capital markets technology group at the investment bank. Through his position Mr. Rivas had access to the firm’s proprietary information system which included facts about then pending transactions.

During the time period Mr. Rivas repeatedly transmitted inside information misappropriated from his employer to others who traded. Mr. Rodriguez, a long time friend, was a member of one of three tipping chains described in the indictment. Mr. Rivas would pass the information to Mr. Rodriguez who would intern transmit it to Mr. Sablon who had been introduced to Mr. Rivas by Mr. Rodriguez in 2015. Initially the information was transmitted by telephone and text message. Over time Mr. Rivas began furnishing the information through a messaging app.

As the scheme continued, Messrs. Rodriguez and Sablon began trading out-of-the-money call options to maximize their profits. The plan was to take the profits and start an investment fund as Mr. Rivas knew. Mr. Rivas, who initially passed the information to Mr. Rodriguez based on friendship, understood that he would be invited to be a partner in the endeavor in return for the inside information. Over the period Messrs. Rodriguez and Sablon earned over $2 million.

Mr. Rodriguez pleaded guilty to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer. All but one of the defendants named in the indictment have pleaded guilty. Two are cooperating with the U.S. Attorney’s Office. The date for sentencing has not been set. See also SEC v. Rivas, Civil Action No. 1:17-cv-06192 (S.D.N.Y.).