SEC Files Tipping, Trading Charges Against 3rd Defendant.

[ by Howard Haykin ]

The SEC on Wednesday, announced additional charges in the insider trading case against 2 brokers - Thomas Conradt and David Weishaus - pertaining to alleged insider trading ahead of IBM Corporation’s acquisition of SPSS Inc.  The amended complaint, filed in federal court in Manhattan, names research analyst Trent Martin as the brokers' source of the confidential information that resulted in trades yielding over $1 million in illicit profits.  The SEC complaint against the Conradt and Weishaus was first announced in an SEC Press Release on 11/29/12. 

Profile of Defendants.   Trent Martin, 33, is an Australian citizen who reportedly resides now in Hong Kong.  From August 2008 through mid-September 2009, Martin worked in NYC as a Research Analyst with ABN Amro Incorporated.   He then transferred to a RBS Securities, Inc., a related broker-dealer in Stamford, CT, where he continued to work as a Research Analyst until November 2010.  Martin had been carrying Series 7 and Series 63 licenses.  On  11/15/12, he resigned from RBS and  returned to Australia.  At all relevant times, Martin was close friends with the law associate and shared an apartment with Conradt.

Thomas Conradt, 34, a resident of Denver, is a lawyer admitted to the Maryland bar in March 2011 and who passed the Colorado bar exam in February 2012.  From 9/2/08 until 10/13/09, Conradt was a registered rep in the NYC office if Euro Pacific Capital, Inc.  At all relevant times, Conradt was Martin’s roommate and friends with Weishaus. 

David Weishaus, 32, a  Baltimore resident, was a registered rep for Euro Pacific Capital, Inc., working in the NYC office from 2009 through September 2008, and in its North Palm Beach office from October 2008 until 11/10/09.  Weishaus attended the same law school as Conradt, graduating a year later.  At all relevant times, Weishaus was friends with Conradt.

SEC Findings and Allegations.   In late May 2009, Martin allegedly learned from a close friend who was an associate at a New York law firm.  Martin purchased SPSS securities, allegedly on the basis of that information, and he tipped roommate Conradt who also allegedly traded in SPSS securities. Conradt, in turn, allegedly tipped Weishaus. The downstream tipping continued to at least 3 other registered reps at Euro Pacific.  All the trades placed by Martin, Conradt, Weishaus, and the 3 RRs ultimately resulted in ill-gotten gains exceeding $1 million.  In its amended complaint, the SEC claims that each of the Defendants engaged in trading that violated Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.

Martin came became privy to the confidential information at the time he was working at a brokerage firm in Connecticut that specialized in Australian equity investments.  He supposedly learned about the nonpublic information involving the impending IBM-SPSS transaction from an attorney friend who was working on the deal.  Martin presumably did not keep the information to himself, but used it for his own benefit - purchasing SPSS securities and subsequently tipping his roommate Thomas Conradt, who traded and tipped his friend and fellow retail broker David Weishaus. Martin was specifically named as their source in IMs between Conradt and Weishaus about their illegal trading.  Soon after hearing about the SEC investigation into insider trading by Conradt and Weishaus, Martin fled the U.S. to Australia, and currently lives in Hong Kong.  

Apparently, Martin’s attorney friend expected him to maintain the information in confidence and not trade on it or disclose it to others. The attorney further sought moral support, reassurance, and advice when he privately told Martin about his new assignment working on the IBM-SPSS acquisition after he disclosed the information in the course of describing the magnitude of the assignment. 

The SEC’s charge that Martin did not wait, and instead attempted to purchase SPSS common stock on the very first business day after learning the nonpublic information from his friend.  His first 3 orders were canceled because he did not have sufficient funds in the account to make the purchases.  He later wired $50,000 from his checking account into his brokerage account that enabled the purchase of SPSS shares to go through.

SEC Phila Regional Office Staff Credits.   Investigation, which is continuing, conducted by:   Mary Hansen, Kristina Littman, John Rymas.   Jeffrey Boujoukos, Catherine Pappas are handling litigation.
 

For further details, go to:   [ SEC PR 12-280, 12/26/12 ]     [ SEC Complaint ]     [ SEC PR 12-245, 11/29/12 ].