SEC Charges Pharmacy Chain Employee with Insider Trading
Litigation Release No. 24903 / September 17, 2020
Securities and Exchange Commission v. Steven J. Sheinfeld, No. 1-20-civ-01692 (M.D. Pa. filed September 17, 2020)
The Securities and Exchange Commission today charged Rite Aid employee Steven J. Sheinfeld with insider trading based on nonpublic information regarding a potential merger between Walgreens Boots Alliance, Inc. and Rite Aid Corp.
According to the SEC's complaint, Sheinfeld disposed of nearly $1 million in Rite Aid securities in advance of disappointing news that caused the price of Rite Aid securities to drop when revealed to the market. The complaint alleges that, on January 18, 2017, one day after learning confidentially through his employment that the anticipated merger between Rite Aid and Walgreens would not close by an end-of-January deadline, Sheinfeld liquidated all of his exercisable Rite Aid employee stock options. The complaint further alleges that on January 19, 2017, Sheinfeld accessed the accounts of his sister-in-law and adult daughter and sold all of their Rite Aid stock as well. Following a January 20, 2017 news article reporting that Federal Trade Commission officials likely would not approve the merger by the deadline, Rite Aid's stock price fell, closing over 13% lower than the prior day's closing price. The complaint alleges that Sheinfeld avoided losses of at least $140,000, and his family members avoided losses of at least $15,000.
The SEC's complaint, filed in federal court in the Middle District of Pennsylvania, charges Sheinfeld with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and seeks permanent injunctive relief and a civil penalty.
The SEC's investigation was conducted by Megan Ryan and supervised by Scott A. Thompson and Kelly L. Gibson, of the SEC's Philadelphia Regional Office. The litigation will be led by Julia C. Green and supervised by Jennifer C. Barry.