A Hot Potato? SEC Charges Securities Professionals Used Coded E-Mail Messages In Insider Trading Scheme

The Securities and Exchange Commission has charged a Wall Street investment banker, another securities professional, and one of their friends in a clandestine insider trading ring that netted approximately $1 million in illicit profits by trading ahead of at least 11 mergers, acquisitions, and other corporate deals. 

The SEC alleged that:  Igor Poteroba, a high-ranking investment banker in UBS Securities LLC’s Global Healthcare Group in New York City, tipped his friend Aleksey Koval with highly confidential inside information about impending transactions involving pharmaceutical companies. Koval, who held positions at securities industry firms at the time, then traded in stocks and options of the companies targeted for acquisition. Koval also tipped their friend Alexander Vorobiev, who traded ahead of four of the deals.
 
Among the means of communication allegedly used to illegally tip and trade on the inside information were coded e-mail messages that referred to securities and money as “frequent flyer miles” and “potatoes.” They allegedly coded one e-mail exchange about insider trading as a discussion about a Macy’s wedding registry.
 
“They thought it was clever to use code words such as frequent flyer miles and wedding registry gifts to conceal their insider trading scheme,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “These words were code for nothing more than ‘we are breaking the law.’”