U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21741 / November 15, 2010
SEC v. Lanexa Management LLC and Thomas C. Hardin, Civil Action No. 10-CV-8599 (S.D.N.Y.)
SEC v. Franz N. Tudor, Civil Action No. 10-CV-8598 (S.D.N.Y.)
SEC Charges Hedge Fund Adviser and Two Wall Street Professionals with Insider Trading
The Securities and Exchange Commission announced insider trading charges against Lanexa Management LLC, a hedge fund investment adviser, and a former managing director, Thomas Hardin, for trading ahead of the September 28, 2007 announced acquisition of 3Com Corp. In a separate complaint, the SEC also charged Franz Tudor, a former proprietary trader at the broker-dealer Schottenfeld Group LLC, for insider trading in connection with the November 29, 2007 announced acquisition of Axcan Pharma Inc.
According to the SEC’s complaints, which were filed in federal court in Manhattan on November 12, 2010, Arthur Cutillo and Brien Santarlas, two former attorneys with the international law firm of Ropes & Gray LLP, misappropriated from their law firm material, nonpublic information concerning the acquisitions of 3Com and Axcan. The SEC alleges that they tipped this inside information, through another attorney, to Zvi Goffer, a former proprietary trader at Schottenfeld, in exchange for kickbacks.
The SEC’s complaint against Lanexa Management and Hardin alleges that Goffer tipped inside information concerning the 3Com acquisition to Gautham Shankar, a fellow proprietary trader at Schottenfeld, who then tipped Hardin this inside information. According to the complaint, Hardin then traded in the securities of 3Com on behalf of a Lanexa Management hedge fund, resulting in approximately $640,000 in illicit profits.
In a separate complaint, the SEC alleges that Goffer also tipped material, nonpublic information concerning the proposed acquisition of Axcan to Tudor, another fellow proprietary trader at Schottenfeld. The SEC alleges that, based on this inside information, Tudor purchased shares of Axcan in two separate personal trading accounts as well as in a proprietary account at Schottenfeld. The SEC alleges that Tudor made approximately $75,000 in illicit profits.
The SEC’s complaints charge Lanexa Management, Hardin, and Tudor with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaints seek permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and civil monetary penalties.
The SEC previously filed related charges against Cutillo, Goffer, Goldfarb, Shankar and five other defendants on November 5, 2009, and Santarlas on December 10, 2009. See Lit. Rel. Nos. 21283 and 21332.
The SEC’s investigation is continuing.
See Also: SEC Complaints: Lanexa Management LLC and Thomas C. Hardin and Franz N. Tudor