Post-It-Note-Eating Man At Center Of Insider Trading Scheme

Grand Central Station Terminal, Manhattan, New York City. guycarpenterphoto/guycarpenterphoto

The dog ate my homework, and the Securities and Exchange Commission says Frank Tamayo ate evidence of a $5.6 million insider trading scheme.

In March, the commission charged a stockbroker and a law clerk with insider trading over a five-year period where they would exchange tips through a middleman at Grand Central Station. Steven Metro, the law clerk at Simpson Thacher & Bartlett, would tell Vladimir Eydelman, a stockbroker at Oppenheimer and then Morgan Stanley, what stocks to buy or sell based on his knowledge about upcoming corporate deals through a middleman, the SEC complaints allege.

The SEC identified that middleman today as Tamayo, who the agency alleged would pass tips obtained from Metro to Eydelman over meetings in Grand Central Station via Post-it notes and napkins. Tamayo, the SEC says, would chew and “sometimes” eat the Post-it note or napkin as a way of destroying the evidence.

The agency says the trio’s scheme was “deliberately structured to avoid detection” and that Metro conveyed the tips to Tamayo “with the understanding that Eydelman would use the information to trade.”

Eydelman made 13 trades based on Metro’s information passed on through Tamayo, the SEC said in its complaint, generating $5.6 million in profits for the three, along with their families, friends, and some of Eydelman’s customers.

The first coordinated insider trading scheme, the SEC says, was in February 2009, when Tamayo discussed his stake in Sirius XM Radio with Metro, worried that it would go bankrupt. Metro then told Tamayo that the media conglomerate Liberty Media would invest in Sirius XM, raising its stock price, the SEC alleges. Metro then contacted Eydelman to buy up Sirius stock. Less than a week later, Sirius would get a $530 million loan and its stock price would go up 60 percent (albeit from 10 cents to 16 cents). The SEC complaint does not say which deal was communicated through a soon-to-be-eaten napkin.

Tamayo, the SEC says, got $168,000 for his part in the scheme, while when he traded on his own in 12 of the deals, earned just over $1 million. Both Metro and Eydelman faced civil charges from the SEC as well as criminal charges from federal prosecutors in New Jersey. Friday, the SEC charged Tamayo with civil violations while the U.S. Attorney in New Jersey brought criminal charges in parallel.

Read more: http://buzzfeed.com/matthewzeitlin/sec-fingers-middleman-in-grand-central-paper-eating-insider

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