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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21263 / October 27, 2009

SEC v. Stanko J. Grmovsek, Case No. 09-9029 (Judge McMahon) (S.D.N.Y. filed October 27, 2009)

SEC Charges Canadian Citizen in $10 Million Insider Trading Scheme

The Securities and Exchange Commission today charged a Canadian citizen from the Toronto area with insider trading, alleging that he generated nearly $10 million in illicit gains by using confidential information to trade ahead of merger and acquisition transactions.

The SEC alleges that Stanko J. Grmovsek used inside information funneled to him by his former law school classmate Gil I. Cornblum to trade on U.S. exchanges through foreign accounts. Approximately $8.5 million of the illegal profit was attributable to trading on U.S. markets, and the illegal trading occurred from 1994 to 1998 and then again from 2004 to 2008. Grmovsek traded in advance of as many as 40 public announcements of merger and acquisition transactions using non-public information that Cornblum (deceased) learned through his work as an attorney with major law firms, including Dorsey & Whitney LLP and Sullivan & Cromwell LLP.

According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, the scheme involved trading in both U.S. and Canadian markets. Grmovsek used the inside information to make illicit trades through numerous Canadian accounts held in his own name and in the names of his friends and relatives, as well as through offshore accounts.

The SEC's complaint charges that Grmovsek violated the anti-fraud provisions of the Securities Exchange Act of 1934, including specific provisions that prohibit trading while in possession of material, non-public information about tender offers. Without admitting or denying the SEC's allegations, Grmovsek agreed to pay disgorgement of $8.5 million with a waiver of all but nearly $1.5 million of that amount based on his current financial condition. Grmovsek consented to an order permanently enjoining him from violating the anti-fraud provisions of the Exchange Act. The settlement is subject to the approval of the court.

The U.S. Attorney's Office for the Southern District of New York announced Grmovsek's guilty plea this evening to a criminal charge of conspiracy to commit securities fraud. The Royal Canadian Mounted Police announced a criminal action charging Grmovsek with fraud, insider trading, and money laundering. The Ontario Securities Commission also announced a settlement of regulatory proceedings against Grmovsek.

The Commission appreciates the assistance of the Financial Industry Regulatory Authority (FINRA), the U.S. Attorney's Office for the Southern District of New York, the Federal Bureau of Investigation, the Ontario Securities Commission, the Crown Law Office (Criminal) of the Ontario Ministry of the Attorney General, and the Royal Canadian Mounted Police.

SEC Complaint

 

http://www.sec.gov/litigation/litreleases/2009/lr21263.htm


Modified: 10/27/2009