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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22769 / August 2, 2013

Securities and Exchange Commission v. Chad C. McGinnis and Sergey Pugach, Defendants, and Bella Pugach, Relief Defendant, Civil Action No. 3:13-cv-1047 (AVC), filed July 24, 2013

The Securities and Exchange Commission today announced insider trading charges against a former systems administrator at Vermont-based Green Mountain Coffee Roasters who repeatedly obtained quarterly earnings data and traded in advance of its public release. The SEC also charged his friend who illegally traded along with him.

In a complaint unsealed July 31 in U.S. District Court for the District of Connecticut, the SEC alleges that Chad McGinnis of Morrisville, Vermont purchased Green Mountain securities - typically out-of-the-money options - shortly before earnings announcements were made. McGinnis also tipped his longtime friend and business associate Sergey Pugach of Hamden, Connecticut, who illegally traded in his own account and his mother's trading account. Together, McGinnis and Pugach garnered $7 million in illegal profits by using inside information to correctly predict the reaction of Green Mountain's stock price to 12 of the past 13 quarterly earnings announcements since 2010.

The SEC alleges that as an information technology employee, McGinnis had access to shared folders on Green Mountain's computer server where drafts of pending press releases and earnings announcements were stored. He also had access to other employees' e-mail accounts. Both sources provided McGinnis with details about upcoming Green Mountain earnings announcements before they became public.

The SEC's complaint was filed under seal on July 24, when the court granted the Commission's motion seeking a temporary restraining order, asset freeze, and other emergency relief. A hearing has been set for August 7.

The SEC's complaint alleges that McGinnis and Pugach violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Pugach's mother Bella Pugach is named as a relief defendant in the SEC's complaint for the purpose of recovering ill-gotten gains in her trading account.

The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Connecticut, the Federal Bureau of Investigation, and the Options Regulatory Surveillance Agency. The SEC's investigation is ongoing.

SEC Complaint

 

http://www.sec.gov/litigation/litreleases/2013/lr22769.htm


Modified: 08/02/2013