Bainbridge Group and a former Brazilian banker will pay $5.1 million to settle insider trading charges brought by the Securities and Exchange Commission (SEC).
The SEC previously charged a Brazilian citizen working in the Miami office of Wells Fargo with tipping him the inside information.
The SEC alleges that Igor Cornelsen and his firm through which he made trades – Bainbridge Group – reaped illicit profits of more than $1.68 million by trading Burger King options based on confidential information ahead of the company’s September 2010 announcement that it was being acquired by a New York private equity firm.
Cornelsen is now a resident of the Bahamas with a home in South Florida after holding high-ranking positions at several banks in Brazil before his retirement.
He sought inside information from his broker Waldyr Da Silva Prado Neto by sending him e-mails with such masked references as, “Is the sandwich deal going to happen?”
Prado was stealing the inside information from another Wells Fargo brokerage customer involved in the Burger King deal.
Cornelsen and Bainbridge Group will pay more than $5.1 million to settle the SEC’s charges.
The defendants were represented by James Benjamin and Nancy Chung at Akin Gump Strauss Hauer & Feld in New York
The litigation continues against Prado, whose assets have been frozen by the court.
“Cornelsen shamelessly prodded Prado for details on ‘the sandwich deal’ and Prado happily obliged to satisfy his customer’s appetite for inside information,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit and Director of the Philadelphia Regional Office.
Cornelsen became Prado’s customer in 2008. On May 17, 2010, Prado sent Cornelsen an e-mail written in Portuguese that translates to, “Igor, if you are around call me at the hotel … I have some info … You have to hear this.”
Cornelsen called Prado at his hotel and they had a 10-minute conversation. Earlier that same day, Prado told a friend that he had knowledge of the impending Burger King deal. After talking with Prado, Cornelsen began trading out-of-the-money Burger King call options the very next day. Cornelsen had never previously traded Burger King securities.
The SEC alleges that Cornelsen continued trading Burger King options over that summer despite losing money in some instances.
In August, Cornelsen sent Prado e-mails seeking assurances that ‘the sandwich deal’ was going to happen, and Prado responded with such statements as “Yes it’s going to happen” and “Everything is 100% under control.” Cornelsen then purchased additional Burger King call options.
Cornelsen took steps to minimize his connection to Prado by purchasing the Burger King call options in accounts held at brokerage firms other than where Prado worked.
The SEC alleges that after the public announcement of the Burger King deal, Cornelsen e-mailed Prado to inquire about the acquisition price.
Upon learning the new per share price that would yield him substantial illegal profits, Cornelsen e-mailed back, “Wow! What a day!”