SEC Brings Charges in Hedge Fund Case Involving Tipping

November 12, 2010

The SEC charged Thomas Hardin as well as two other defendants, Lanexa Management LLC, and former Schottenfeld Group LLC trader Franz Tudor, for insider trading in connection with corporate acquisitions.  The SEC has, to date, charged multiple persons with insider trading in connection with the SEC v. Cutillo and SEC v. Galleon cases.

The SEC alleged that a Lanexa-managed hedge fund and Hardin reaped approximately $640,000 in illegal profits by insider trading based on confidential information about an impending acquisition involving 3Com Corp. The SEC also alleged that Tudor made approximately $75,000 in illicit profits by trading on material, nonpublic information concerning the proposed acquisition of Axcan Pharma Inc. According to the SEC, the inside information about the 3Com acquisition that was obtained by Hardin was derived from Santarlas and Cutillo, who were privy to the confidential details through their work at the law firm.  Cutillo and Santarlas allegedly tipped this inside information through another attorney to Zvi Goffer, a former proprietary trader at Schottenfeld, in exchange for kickbacks. Goffer then tipped the inside information to fellow Schottenfeld trader Gautham Shankar, who then tipped Hardin. Goffer, Shankar and Schottenfeld were among those previously charged for their roles in the insider trading rings.

According to the SEC, Goffer also tipped material, nonpublic information about the proposed acquisition of Axcan to Tudor. Based on the inside information, Tudor purchased shares of Axcan in two separate personal trading accounts as well as in a proprietary account at Schottenfeld.

Click here to access the administrative action.


Enforcement Actions, Investment Advisers