Thomas Hardin appeared to have it all - 30, Wharton graduate, MD at a hedge fund manager, holder of Series 7 and 55 securities licenses - apparently, it wasn't enough.  He's accused of trading on, and sharing, insider information that generated nearly $1 million in illicit profits for his employer, New York-based Lanexa Management, and the firm's hedge fund clients.  The alleged violations all took place in 2007.  Here are the details. 

    This case involves ... insider trading by Hardin in the securities of Hilton Hotels Corp., Google, Inc., and Kronos Inc.  Hardin traded, or caused Lanexa to trade, based on material nonpublic information re: takeovers of Hilton and Kronos and a Google quarterly earnings announcement.  Hardin received the info from Roomy Khan ("Khan"), an individual investor who had, herself, received such information from various inside sources.  Hardin passed the tips to others who traded on the information.  Tippers received thousands for the information.

    1.  Khan tipped Hardin to information she received from Deep Shah ("Shah"), a Moody's rating agency analyst, about an impending takeover of Hilton by The Blackstone Group.  Hardin traded on the information and tipped friend Gautham Shankar, a prop trader at NY-based broker-dealer Schottenfeld Group LLC., who also traded on the information.  Shankar, in turn, tipped others at Schottenfeld who traded on the information.

    2.  Khan tipped Hardin to about Google's Q2 - 2007 earnings that she received from an employee at Market Street Partners, an IR consulting firm that did work for Google.  Hardin traded on the information, then tipped Shankar, who similarly traded on the information.

    3.  Further, Khan tipped Hardin about the impending acquisition of Kronos by PE firm Hellman & Friedman that she received from Shah, who had first received the information from a friend.  Hardin traded on the information, and tipped Shankar, who similarly traded on the information, and tipped others at Schottenfeld who traded based on the information.

    Hilton Hotels Corp.  On 7/3/07 it was announced that a private equity firm would be buying Hilton for $47.50 a share ($11.45 premium).  On or about 7/2, Khan learned about the deal from Shah, who was a Moody's analyst.  She traded on the information and passed the tip to her friend, Hardin, who caused Lanexa to purchase 25,000 shares of Hilton.  Hardin also tipped his friend Shankar, who passed the tip to others at Schottenfeld.  Lanexa made $260K on the trades.  All told, various Schottenfeld accounts generated $1.2 million in illicit profits by trading a total of 81,000 Hilton shares and 773 Hilton call options. 

    Google, Inc.   Within a week of the Hilton tip, Khan learned from another source that Google's 2nd quarter 2007 EPS were down 25 cents - in sharp contrast to the market's expectation that EPS would be strong.  The quarterly results were scheduled to be announced after the close of business on 7/19/07.  The Google tip came from someone at Market Street Partners, a consulting firm that did investor relations work.  On or about 7/10/07, Kahn learned about the quarterly results, and traded profitably on the material nonpublic information she had been provided.  On or about 7/12, she passed the tip onto Hardin, who caused Lanexa to short 5,900 shares of Google.  After the announcement, Google shares fell $28 to almost $520;  Lanexa made $150K on the trades.

    Kronos Inc.   On 3/23/07, Kronos announced at the opening that it would be taken private by Hellman.  Earlier, in mid-March, Shah learned from a friend that Kronos was on the auction block and was about to be acquired.    On 3/14, Shah tipped Khan;  Khan tipped Hardin on 3/15.  Hardin passed the tip to Shanker, who tipped his Schottenfeld colleagues.  On 3/23, when it was announced that Kronos would be acquired for $55 a share, Kronos's stock price jumped 14% to $53.11.  Lanexa had a big "pay day" on its Kronos trades, generating $547,000 in profits.  At Schottenfeld, 14 accounts purchased Kronos shares ahead of the announcement, and realized cumulative profits of $800,000. 

The complaint offers an interesting account of the flow and timing of information tips.  For these and other details, click onto:   [SEC Complaint, 11/12/10]