The US Securities and Exchange Commission and the Department of Justice (DOJ) have charged a Canadian hedge fund dealer with securities fraud and wire transfer fraud for allegedly using inside information to conduct a front-running program in which he earned more than 3.6 US dollars. Dollar received a million.
Front running is when a broker who is trading in financial assets uses inside knowledge of a future transaction that will significantly affect their price. The lawsuits filed by the DOJ and the SEC allege that Sean Wygovsky worked for more than six years in insider trading by misusing confidential, material, nonpublic information about the company’s securities dealing orders. He allegedly did so by timely placing profitable securities trades on accounts controlled by him or family members based on this information.
Although the company’s name is omitted from the complaints, a LinkedIn profile of Sean Wygovsky, now no longer available, had him listed as an employee of Polar Asset Management Partners Inc., based in Toronto, since 2013, the same year it is said in the complaints that he started working for the unnamed company. And a 2016 magazine article portraying him as a rising star in the hedge fund industry said he worked for Polar Asset Management.
Wygovsky allegedly took advantage of the fact that the size of his company’s trading orders often caused slight, temporary movements in the price of the securities being traded. For example, if the company makes a large inventory purchase, the increased demand could cause the stock price to rise slightly, and if the company makes a large inventory sale, the increased supply could cause a slight decrease in the price. Having access to the firm’s orders to trade, Wygovsky knew in advance when a particular stock price would move slightly up or down as a result of that trade.
“As alleged, Sean Wygovsky has illegally exploited his access to his employer’s firm’s pending trade contracts to conduct numerous business in anticipation of the rise or fall that buying or selling the firm would cause,” US Attorney for the Southern District Audrey Strauss of New York said in a statement.
Wygovsky, who US prosecutors said he did the illicit deals over 700 times, is believed to have tried to cover his tracks by trading brokerage accounts held in the names of his close relatives. Two of his relatives reportedly transferred millions of dollars from their trading accounts to bank accounts they controlled between 2015 and 2020 and then wrote checks for hundreds of thousands of dollars to Vygovsky and his immediate family members. The two relatives are also believed to have transferred hundreds of thousands of dollars to a Slovenian bank for the benefit of relatives of Vygovsky’s wife.
“As claimed in our complaint, Wygovsky has abused his position and his employer’s trust by driving the very top securities transactions he was supposed to carry out for his employer’s advisory clients,” said Joseph Sansone, head of the Market Abuse Unit SEC Enforcement Division issued a statement. “Thanks to the development and use of sophisticated data analysis tools by the SEC, Wygovsky’s alleged scheme was exposed and efforts to avoid detection using family members’ accounts failed.”
Wygovsky, 40, is on trial by the U.S. Southern District Attorney’s Office for securities fraud with a maximum sentence of 20 years in prison and a wire fraud charge with a maximum sentence of 20 years in prison. The SEC has charged him with violating the anti-fraud provisions of federal securities laws, demanding the surrender of unlawful profits, as well as interest, penalties, and injunctions.
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Tags: Pioneers, Polar Asset Management Partners, Sean Wygovsky, SEC, Securities Fraud, Southern District of New York, Wire Transfer Fraud
source https://thedailytradingnews.com/sec-doj-charge-hedge-fund-trader-in-alleged-front-running-scheme/
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