U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22554 / November 30, 2012
Securities and Exchange Commission v. Igor Cornelsen and Bainbridge Group Inc., United States District Court for the Southern District of New York, Civil Action No. 12-CIV-8712
BRAZILIAN EX-BANKER TO PAY $5.1 MILLION FOR INSIDER TRADING IN BURGER KING STOCK
The Securities and Exchange Commission today announced insider trading charges against a Brazilian ex-banker for his role in a scheme to illegally trade Burger King Holdings, Inc. (“Burger King”) securities. The SEC previously charged a Brazilian citizen working in the Miami office of Wells Fargo Advisors, LLC (“Wells Fargo”) with tipping him the inside information.
The SEC alleges that Igor Cornelsen (“Cornelsen”) and his firm through which he made trades — Bainbridge Group Inc. — reaped illicit profits of more than $1.68 million by trading Burger King options based on confidential information ahead of the company’s September 2010 announcement that it was being acquired by a New York private equity firm. Cornelsen is now a resident of the Bahamas with a home in South Florida after holding high-ranking positions at several banks in Brazil before his retirement. The complaint alleges that he sought inside information from his broker Waldyr Da Silva Prado Neto (“Prado”) by sending him e-mails with such masked references as, “Is the sandwich deal going to happen?” The SEC alleges that Prado stole the inside information from another Wells Fargo brokerage customer involved in the Burger King deal.
Cornelsen and Bainbridge Group agreed to pay more than $5.1 million to settle the SEC’s charges. The settlement is subject to court approval. The litigation continues against Prado, whose assets have been frozen by the court.
According to the SEC’s complaint filed today in federal court in Manhattan, Cornelsen became Prado’s customer in 2008. On May 17, 2010, Prado sent Cornelsen an e-mail written in Portuguese that translates to, “Igor, if you are around call me at the hotel … I have some info … You have to hear this.” Cornelsen called Prado at his hotel and they had a 10-minute conversation. Earlier that same day, Prado told a friend that he had knowledge of the impending Burger King deal. After talking with Prado, Cornelsen began trading out-of-the-money Burger King call options the very next day. Cornelsen had never previously traded Burger King securities.
The SEC alleges that Cornelsen continued trading Burger King options over that summer despite losing money in some instances. In August, Cornelsen sent Prado e-mails seeking assurances that ‘the sandwich deal’ was going to happen, and Prado responded with such statements as “Yes it’s going to happen” and “Everything is 100% under control.” Cornelsen then purchased additional Burger King call options. The complaint alleges that Cornelsen took steps to minimize his connection to Prado by purchasing the Burger King call options in accounts held at brokerage firms other than Prado’s.
The SEC alleges that after the public announcement of the Burger King deal, Cornelsen e-mailed Prado to inquire about the acquisition price. Upon learning the new per share price that would yield him substantial illegal profits, Cornelsen e-mailed back, “Wow! What a day!”
The SEC’s complaint charges Cornelsen and Bainbridge Group with violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3. The proposed final judgment orders them to jointly and severally pay $1,681,090 in disgorgement and $136,620.96 in prejudgment interest. Cornelsen is ordered to pay a $3,362,180 penalty. They neither admit nor deny the SEC charges. The proposed final judgment also enjoins them from future violations of these provisions of the federal securities laws.
The SEC’s investigation, which is continuing, has been conducted by Market Abuse Unit members Megan Bergstrom, David Brown, and Diana Tani in the Los Angeles office with assistance from Charles D. Riely in the New York office. The SEC appreciates the assistance of the Comissão de Valores Mobliliários (Securities and Exchange Commission of Brazil), the Options Regulatory Surveillance Authority (ORSA), and the Financial Industry Regulatory Authority (FINRA).
For further information see Litigation Release No. 22486 (Sept. 21, 2012).