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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23474 / February 24, 2016

Securities and Exchange Commission v. Steven Fishoff, et al., Civil Action No. 3:15cv03725

Court Approves Partial Settlement with Trader in Case

The Honorable Michael A. Shipp, United States District Judge for the District of New Jersey, has entered a partial final consent judgment against defendant Paul Petrello, one of four individuals charged with engaging in an elaborate insider trading scheme involving the misappropriation of confidential information about secondary stock offerings and also illegally trading ahead of the announcement of a licensing agreement between two large pharmaceutical companies. The SEC's complaint alleges that the scheme involved at least 15 stocks and generated a total of more than $4.4 million in illegal trading profits for the group.

The SEC's complaint was filed on June 3, 2015 and charges California resident Steven Fishoff, his brother-in-law Steven Costantin of New Jersey, Fishoff's friend and California neighbor Ronald Chernin, and Florida resident Paul Petrello, a friend and former day trading associate of Fishoff, as well as various entities they used to perpetrate the scheme. According to the Commission's complaint, Fishoff, Chernin and Costantin posed as legitimate portfolio managers in order to induce investment bankers to bring them "over the wall" and share confidential information about upcoming secondary stock offerings. After agreeing with the bankers that they would neither disclose the confidential offering information nor trade in the issuers' stock before the offerings were announced, they violated those agreements by tipping each other about the upcoming offerings and shorting the stocks before the offerings were announced. On numerous occasions, Fishoff tipped Petrello about the offerings and Petrello then also shorted those stocks before the offerings were announced. In one instance, Fishoff also tipped Petrello with confidential information about the pharmaceutical company transaction and Petrello, as well as the other defendants, illegally purchased that company's stock before the transaction was announced.

In a prior parallel action, the U.S. Attorney's Office for the District of New Jersey also announced criminal charges against Fishoff, Petrello, Chernin, and Costantin on June 3, 2015. Petrello pled guilty to the parallel criminal charges on February 19, 2016.

The partial judgment, to which Petrello consented, permanently enjoins him and two entities he controls, Brielle Properties, Inc. and Oceanview Property Management, LLC ("Petrello Entities"), which are also charged in the Commission's complaint, from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder and Rule 105 of Regulation M. The judgment also enjoins Petrello and the Petrello Entities from participating in secondary securities offerings in the manners set forth in the judgment. The judgment does not resolve the Commission's requests for disgorgement of ill-gotten gains, prejudgment interest thereon, and civil monetary penalties against Petrello, which remain pending. The Commission's claims against the other defendants also remain pending.

The SEC appreciates the assistance of the Financial Industry Regulatory Authority, U.S. Attorney's Office for the District of New Jersey, Federal Bureau of Investigation, and the Options Regulatory Surveillance Authority.

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https://www.sec.gov/litigation/complaints/2015/comp-pr2015-107.pdf

https://www.sec.gov/news/pressrelease/2015-107.html

 

http://www.sec.gov/litigation/litreleases/2016/lr23474.htm


Modified: 02/24/2016