U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22135 / October 20, 2011
SEC v. Cutillo et al., Civil Action No. 09-CV-9208 (S.D.N.Y.) (RJS)
Attorneys Arthur J. Cutillo and Jason C. Goldfarb Settle SEC Insider Trading Charges
The Securities and Exchange Commission announced today that on October 17, 2011, the Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York entered final judgments against Arthur J. Cutillo and Jason C. Goldfarb in SEC v. Cutillo et al., 09-CV-9208, an insider trading case the Commission filed on November 5, 2009. The Commission charged Cutillo and Goldfarb, practicing attorneys at the time of their illicit conduct, with violations of antifraud provisions of the federal securities laws. The Commission alleged that Cutillo misappropriated from his law firm, Ropes & Gray LLP, material, nonpublic information concerning upcoming corporate acquisitions, including the 2007 announced acquisitions of 3Com Corp. and Axcan Pharma Inc. The Commission further alleged that Cutillo, through his friend Goldfarb, tipped the information to Zvi Goffer, a former proprietary trader at the broker-dealer Schottenfeld Group, LLC., in exchange for kickbacks. As alleged in the complaint, Zvi Goffer traded on this inside information and had numerous downstream tippees who also traded on the information, including other Wall Street traders and hedge funds.
To settle the Commission’s charges, Cutillo and Goldfarb each consented to the entry of a final judgment that: (i) permanently enjoins each from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders each to pay disgorgement of $32,500, plus $4,204 in prejudgment interest. In related administrative proceedings, the Commission suspended Cutillo and Goldfarb from appearing or practicing before the Commission pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice.
Cutillo and Goldfarb each previously pled guilty to charges of securities fraud and conspiracy to commit securities fraud in related criminal cases, United States v. Arthur Cutillo, 10-CR-0056 and United States v. Jason Goldfarb, 10-CR-0056 (S.D.N.Y.). Cutillo was sentenced to a 30 month prison term and ordered to pay a criminal forfeiture of $378,608. Goldfarb was sentenced to a three year prison term and ordered to pay a $32,500 fine and criminal forfeiture of $1,103,131.
For further information, see Litigation Releases Nos. 21283 (Nov. 5, 2009), 21332 (Dec. 10, 2009), 21470 (Mar. 31, 2010), 21587 (July 7, 2010), 21741 (Nov. 15, 2010), 21826 (Jan. 26, 2011), 21999 (June 14, 2011), 22011 (June 21, 2011), 22051 (July 20, 2011), 22056 (Aug. 2, 2011), and 22078 (Aug. 31, 2011).