U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21493 / April 20, 2010
SEC v. Galleon Management, LP, et al., Civil Action No. 09-CV-8811 (S.D.N.Y.) (JSR)
The SEC Settles Its Claims Against Defendant Schottenfeld Group, LLC
The Commission announced that on April 19, 2010, The Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, issued an order approving a settlement with Schottenfeld Group, LLC ("Schottenfeld Group") in SEC v. Galleon Management, LP, et al., 09-CV-8811 (S.D.N.Y.) (JSR), an insider trading case the Commission filed on October 16, 2009. Schottenfeld Group, a New York limited liability company and registered broker-dealer based in New York, New York, has consented to the entry of a final judgment.
The Commission charged Schottenfeld Group with violations of the antifraud provisions of the federal securities laws, alleging:
- Schottenfeld Group proprietary trader Gautham Shankar obtained inside information about a July 2007 earnings announcement at Google, Inc. Shankar traded on such information in Schottenfeld Group accounts.
- Schottenfeld Group proprietary traders Shankar and Zvi Goffer obtained inside information about The Blackstone Group's 2007 purchase of Hilton Hotels Corp. Goffer and Shankar traded on such information in Schottenfeld Group accounts.
- Schottenfeld Group proprietary traders Shankar, Goffer and David Plate obtained inside information about a March 2007 announcement regarding Hellman & Friedman's acquisition of Kronos Inc. Shankar, Goffer and Plate traded on such information in Schottenfeld Group accounts.
The final judgment against Schottenfeld Group permanently enjoins it from violating the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. It also orders Schottenfeld Group to disgorge $460,475.28, representing its share of profits gained and/or losses avoided as a result of the conduct alleged, together with prejudgment interest thereon in the amount of $72,202.72. In addition to disgorgement of profits, the judgment orders a civil penalty representing fifty percent of the disgorgement amount, a discount from a one-time penalty, in recognition of Schottenfeld Group's agreement to cooperate in the Commission's investigation.
In addition, Schottenfeld Group has agreed to implement enhanced policies and procedures to prevent securities law violations such as those alleged. It will retain an independent consultant to review its policies and procedures within 1 year, and to report its findings to the Commission staff.
Separately, the Commission and Schottenfeld Group settled the Commission's action titled, SEC v. Cutillo et al., 09-CV-9208, pending before Judge Richard J. Sullivan, United States District Judge, United States District Court for the Southern District of New York.
For further information, see Litigation Release Nos. 21255 (October 16, 2009), 21284 (November 5, 2009), and 21397 (January 29, 2010).