Oh Boy! Guilty Plea In Disney Insider Trading Case

Yonni Sebbag, a/k/a "Jonathan Cyrus," has pleaded guilty to fraud charges related to his participation in an insider trading scheme in which Sebbag obtained confidential inside information about the Walt Disney Company, including information about Disney's quarterly earnings, and attempted to sell the information to investment companies seeking to trade on inside information. 

According to the Information to which Sebbag pled guilty, the criminal complaint previously filed in this case, and statements made during the guilty plea proceeding:
 
From March 2010 through May 25, 2010, Sebbag's alleged co-conspirator, Bonnie Hoxie, was employed as a secretary to Disney's Head of Corporate Communications. In this capacity, Hoxie obtained material, nonpublic information, including Disney's quarterly earnings statements (the "Inside Information"). In violation of Hoxie’s duties of trust and confidence, Hoxie disclosed the Inside Information to Sebbag, who in turn offered to sell the Inside Information to outside investors for the purpose of trading in advance of the official public announcement of Disney's earnings.
 
As part of the scheme, Sebbag and Hoxie sent anonymous letters to multiple hedge funds and other investment companies, many of which were located in Manhattan, offering to sell the Inside Information for purposes of illegal insider trading. Special agents of the FBI, who were working in undercover capacities, posed as hedge fund traders (the "Tippees") and agreed to buy the Inside Information from Sebbag for purposes of trading in advance of the public announcement of the Inside Information.
 
On May 8, 2010, three days in advance of the May 11, 2010, public announcement of Disney's earnings for the second quarter of 2010, Sebbag and Hoxie sent to the Tippees a confidential document titled "The Walt Disney Company Q2 Fiscal 2010 Key Topics Speaking Points." The document contained a collection of talking points that Disney executives intended to refer to while answering analysts' questions during the May 11, 2010, earnings call.
 
In addition, on May 11, 2010, roughly two hours in advance of the public announcement, Sebbag and Hoxie notified the Tippees that Disney's earnings per share would be 48 cents – which was better than what stock analysts had forecast. On May 14, 2010, Sebbag met with two undercover FBI agents in New York and accepted payment of $15,000 cash for having released the Inside Information. Sebbag further agreed that he would provide similar confidential information in the future in return for a 30 percent share of any profits from the insider-trading scheme.
 
Sebbag pled guilty to one count of conspiracy to commit securities fraud and wire fraud and one count of wire fraud. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. Sebbag agreed as part of his plea agreement to forfeit $15,000, representing the funds he received from the undercover FBI agents.
 
Our prior post on this case is available at http://www.financialfraudlaw.com/lawblog/mickey-mouse-insider-trading-scheme-involving-disney-employee-sec-alleges/1075.