U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21687A / October 7, 2010
Securities and Exchange Commission v. Gianluca Di Nardo, et al., U.S. District Court for the Southern District of New York, Civil Action No. 08-cv-6609 (PAC) (S.D.N.Y. July 25, 2008)
ITALIAN TRADER AGREES TO PAY $3 MILLION TO SETTLE INSIDER TRADING CHARGES; SEC PURSUES ADDITIONAL DEFENDANTS
The Securities and Exchange Commission today announced a proposed settlement with Gianluca Di Nardo, an Italian citizen, and his investment vehicle Corralero Holdings, Inc., ("Corralero") for alleged insider trading in the securities of two issuers, DRS Technologies, Inc. ("DRS") and American Power Conversion Corp. ("APCC"). DiNardo, the beneficial owner of Corralero, agreed to settle the charges with the Commission by paying approximately $3 million in disgorgement and penalties. The Commission amended its Complaint in its previously-filed action against unknown purchasers of DRS and APCC call options to name these settling defendants. The Amended Complaint also names other previously-unknown defendants who allegedly engaged in insider trading in DRS securities.
In its Amended Complaint, the Commission alleges that Di Nardo, through Corralero, made highly profitable and suspicious purchases of DRS and APCC call options ahead of public disclosures announcing the acquisitions of these companies. The Amended Complaint alleges that, between September 21 and 22, 2006, Di Nardo bought 2,400 APCC call options at a cost of approximately $299,800 while in possession of material, nonpublic information. According to the Amended Complaint, Di Nardo liquidated all APCC call options and made a profit of approximately $1.4 million following the announcement by Schneider Electric SA on October 30, 2006, that it would acquire all of APCC's outstanding shares for $31 a share. In addition, the Commission alleges that on April 29, 2008, Di Nardo bought 550 DRS call options that were out-of-the-money and set to expire in the near term while in possession of material, nonpublic information. According to the Amended Complaint, Di Nardo liquidated all DRS call options, reaping a profit of approximately $669,750 following a May 8, 2008, Wall Street Journal article reporting the advanced merger negotiations between Finmeccanica S.p.A. and DRS, and after confirmation by DRS that it was engaged in talks regarding a potential strategic transaction.
Under the terms of the proposed settlement, Di Nardo and Corralero consent, without admitting or denying the allegations of the Amended Complaint, to the entry of final judgments permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and ordering them jointly and severally liable for the payment of $2,110,600 in disgorgement, $191,345.77 in prejudgment interest, and a civil penalty of $700,000. The settlement remains subject to the approval of the U.S. District Court for the Southern District of New York.
The Commission's Amended Complaint also identifies and alleges the following individuals and entities as purchasers of DRS call options in advance of the announcements: Oscar Ronzoni, an Italian citizen and manager of Luga Audit & Consulting SA in Lugano, Switzerland; Paolo Busard², an Italian citizen who works for a subsidiary of Luga in Milan, Luga Audit & Consulting srl; Tatus Corp., a Panamanian corporation, an investment vehicle based in Switzerland for which Busard² is the ultimate beneficial owner and Ronzoni is the formal managing director; and A-Round Investment SA, a consulting firm based in Lugano controlled by Busard².
The Amended Complaint alleges that Ronzoni, Busard², Tatus, and A-Round purchased DRS call options that were out-of-the-money and set to expire in the near term while in possession of material, nonpublic information. According to the Amended Complaint, on May 5 and 6, 2008, Ronzoni bought a total of 340 DRS call options; on May 7, 2008, Ronzoni also purchased, through Tatus, 800 DRS call options; and, on May 7, 2008, Busard² through A-Round purchased a total of 130 DRS call options. Following the May 8th Wall Street Journal article, Ronzoni made a profit of $156,400, Tatus made a profit of $695,459.97, and Busard², through A-Round, made a profit of $115,840 after liquidating their DRS call option stakes.
By virtue of the conduct described above, the Commission alleges that Ronzoni, Busard², Tatus, and A-Round violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Amended Complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil money penalties. The Commission's action continues as to these defendants.
Previously in this action, pursuant to the Commission's emergency request in July 2008, the Court entered a temporary restraining order freezing the assets of the then-unknown purchasers of DRS and APCC call options. On August 18, 2008, the Honorable Paul A. Crotty, U.S. District Judge in the Southern District of New York, extended the asset freeze and ordered additional relief through the issuance of a preliminary injunction against the then-unknown purchasers of DRS and APCC call options.
The SEC acknowledges the assistance of the U.S. Department of Justice, the Options Regulatory Surveillance Authority, the Swiss Financial Market Supervisory Authority, and the Swiss Federal Office of Justice in this matter.
For more information, please see Litigation Release No. 20654 (July 25, 2008).
See Also: SEC Complaint