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Criminal Complaint Against 2 Insider Traders With Shades of 'Wall Street'

Criminal Complaint Against 2 Insider Traders With Shades of 'Wall Street'

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Published by DealBook
Criminal complaint against two finance professionals over an $870,000 insider trading scheme with shades of "Wall Street," complete with cryptic code phrases reminiscent of "Blue Horseshoe loves Anacott Steel."
Criminal complaint against two finance professionals over an $870,000 insider trading scheme with shades of "Wall Street," complete with cryptic code phrases reminiscent of "Blue Horseshoe loves Anacott Steel."

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Published by: DealBook on Mar 24, 2010
Copyright:Attribution Non-commercial

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04/23/2012

 
Approved:
Before:
LEXANDER
JWILLSCHERMARISSA
MOL
WILLIAM
J.
STELLMACH
Assistant
United
States
Attorneys
HONORABLE
GABRIEL
W.
GORENSTEIN
United
States
Magistrate
Judge
Southern
District
of
New
Yf.
rO
M
1\
G
5·
<
~ ~
2
------------x.l
1
1:'1
@
SEALED
COMPLAINT
UNITEDSTATES
OF
AMERICA
-
v.-
IGORPOTEROBA,
and
ALEXEI
P.
KOVAL,
a/k/a
"Aleksey
Koval,"
Defendants.
-------X
SOUTHERN
DISTRICT
OF
NEW
YORK,
ss.:
Violationof
18
U.S.C.
§
371;
15
U.S.C.
§§
78j
(b),
78ff;
17
C.F.R.
§
240.10b-5
COUNTY
OF
OFFENSE:
NEW
YORK
ADAM
S.
ROESER,
being
duly
sworn,
deposes
and
says
that
he
is
a
Special
Agent
with
theFederal
Bureau
of
Investigation
("FBI")
and
charges
asfollows:
COUNTONE
(Conspiracy)
Relevant
Persons
And
Entities
1.
From
atleast
in
or
about
July
2005
up
to
and
including
in
or
about
February
2009,
in
the
Southern
District
of
New
York
and
elsewhere,
IGOR
POTEROBA
and
ALEXEI
P.
KOVAL,
a/k/a
"Aleksey
Koval,"
the
defendants,
and
others
known
and
unknown,
unlawfully,
willfully,
andknowingly
did
combine,
conspire,confederate
and
agree
together
and
with
each
other
to
commit
offenses
against
the
United
States,to
wit,
securities
fraud,
in
violation
of
Title
IS,United
States
Code,
Sections
78j
(b)
&
78ff,
and
Title
17,
Code
of
FederalRegulations,Section
240.10b
5.
2.
It
was
a
part
and
object
of
the
conspiracy
that
IGOR
POTEROBA
and
ALEXEI
P.
KOVAL,
a/k/a
"Aleksey
Koval,"
thedefendants,
and
others
known
and
unknown,
unlawfully,
willfully
 
and
knowingly,
directly
and
indirectly,
by
the
use
ofthe
means
and
instrumentalities
of
interstate
commerce,
and
ofthe
mails,
and
of
facilities
of
national
securities
exchanges,
would
and
did
use
andemploy,
in
connection
with
the
purchase
and
sale
of
securities,
manipulative
and
deceptivedevices
and
contrivances
in
violation
of
Title
17,
Code
ofFederalRegulations,Section
240.10b-5
by:
(a)
employing
devices,
schemes
and
artifices
to
defraud;
(b)
making
untrue
statementsof
material
fact
and
omittingto
state
material
facts
necessary
in
orderto
make
thestatements
made,
in
the
light
of
the
circumstances
under
which
they
were
made,
not
misleading;
and
(c)
engaging
inacts,
practices
and
coursesof
business
which
operated
and
would
operate
as
a
fraud
and
deceit
upon
persons,
all
inviolation
of
Title
15,
United
States
Code,
Sections
78j
(b)
and
78ff,
and
Title
17,
Code
of
FederalRegulations,
Section
240.10b-5.
Overt
Acts
3.
Infurtherance
of
the
conspiracy
and
to
effect
the
illegal
objectsthereof,
IGOR
POTEROBA
and
ALEXEI
P.
KOVAL,
a/k/a
"Aleksey
Koval,"
the
defendants,
committed
the
following
overt
acts,
among
others,
in
the
Southern
District
of
New
York
and
elsewhere:
a.
On
or
about
July
12,
2005,
POTEROBA
asked
a
bankerabout
the
status
ofthe
acquisition
ofGuilford
Pharmaceuticals,
Inc.
("Guilford"),
a
companywhose
securities
traded
on
the
NASDAQ
under
the
trading
symbol
"GLFD,"
and
was
informed
that
the
Guilford
board
of
directors
would
decide
onSunday,
July
17,
2005;
b.
On
or
about
July
13,
2005,
POTEROBA
asked
KOVAL
by
e-mail
to
give
him
a
call;
c.
On
or
about
July
13,
2005,
POTEROBA
sent
an
e-mail
to
KOVAL
stating:
"Keep
me
posted
as
to
howMany
frequent
flier
miles
you'vegot
this
far
and
how
many
you
plan
to
get
by
Friday[.]"
POTEROBA
later
continued:
;
"Plans
for
a
trip
look
fine
so
far",
and
"Worst
case
we
can
get
a
refund
by
Monday[.]";
d.
On
or
about
July
14,
2005,
KOVAL
responded
to
POTEROBA:
"As
I
mentioned,
I
just
got
into
this
frequent
flier
program.
I
got
five
thousand
of
sign-in
bonus
milesbut
thinking
maybe
if
I
fly
often,
I
will
get
additional
three
to
five
K
miles.
.";
2
 
e.
On
or
about
July
14/
2005/
KOVAL
wiredapproximately
$5/000
from
a
personal
bank
account
into
a
trading
account
held
in
the
name
of
a
co
conspirator
not
named
as
a
defendant
herein
("CC
1"
and
the
"CC-1
Terra
Nova
Account")and/on
or
about
July
15/
2005/
the
CC-1
Terra
Nova
Account
purchased
2/100
shares
ofGuilford
common
stock
for
a
total
cost
of
approximately
$4/983j
f.
On
or
about
January
22/
2007/
POTEROBA
and
KOVAL
exchanged
a
series
ofemails
related
to
a
wedding
registry
at
Macy/s
during
which
POTEROBA
stated
to
KOVAL/
"sale
ends
on
Friday"j
g.
Between
January
22/
2007
and
Friday/January
26/2007/
KOVAL/
usingthe
CC-1
Terra
Nova
Account/
purchased
500
shares
of
common
stock
and
25
call
option
contractsfor
Molecular
Devices
Corporation
("Molecular")/
a
companywhose
securities
traded
on
the
NASDAQ
under
the
sYmbol
"MDCC"j
h.
On
or
about
Friday/January
23/2009/
POTEROBA
made
three
calls
to
KOVALj
i.
On
or
about
Monday/
January
26/2009/
KOVAL
purchased
14/000
sharesof
PharmaNet
Development
Group/
Inc.
("PharmaNet")
/a
companywhose
securities
traded
on
the
NASDAQ
under
the
sYmbol
"PDGI/"
using
the
CC-1
Terra
Nova
Accountj
and
j.
Betweenon
or
about
January
26/2009/
and
on
or
about
February
2/2009/
KOVAL
purchased
a
total
of
approximately
30/000
shares
of
PharmaNet
through
the
CC-1
Terra
Nova
Account.
(Title
18/
United
States
Code/
Section
371.)
COUNTS
TWO
THROUGH
FOUR
(Securities
Fraud)
4.
On
or
about
thedates
set
forth
below/
in
the
Southern
District
of
New
York
and
elsewhere/
IGOR
POTEROBA
and
ALEXEI
P.
KOVAL/
a/k/a
"AlekseyKoval/"
the
defendants/unlawfully/
willfully
andknowingly/
directly
and
indirectly/
by
the
use
ofthe
means
and
instrumentalities
of
interstate
commerce/
and
ofthe
mails/
and
of
the
facilities
of
national
securities
exchanges/
in
connectionwith
the
purchase
and
sale
of
3

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