SEC Charges Former Green Mountain Coffee Employee And Friend In $7 Million Insider Trading Scheme
Former Green Mountain Coffee Roasters systems administrator Chad McGinnis and his friend Sergey Pugach illegally earned $7 million by trading on nonpublic quarterly earnings data obtained through McGinnis’s IT access, tipping each other and using spouses’ phones to coordinate 12 successful trades out of 13, leading to SEC charges under Section 17(a) and 10(b) with an asset freeze and ongoing investigation.
The SEC charged Chad McGinnis, a former systems administrator at Green Mountain Coffee Roasters, and his friend Sergey Pugach with insider trading for generating $7 million in illegal profits by trading Green Mountain Coffee securities—primarily out-of-the-money options—before 12 of the company’s 13 quarterly earnings announcements since 2010. McGinnis obtained nonpublic earnings data through access to shared server folders and employee emails, then tipped Pugach, who traded in his own account and his mother Bella Pugach’s account, which the SEC named as a relief defendant to recover ill-gotten gains. The SEC alleges violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, citing coordinated communications via phone and text—including using spouses’ devices—and secured a temporary restraining order and asset freeze on July 24, with a hearing set for August 7.
Former Green Mountain Coffee Roasters systems administrator Chad McGinnis and his longtime friend Sergey Pugach orchestrated an insider trading scheme that generated $7 million in illegal profits by trading on nonpublic quarterly earnings data obtained through McGinnis’s privileged access to company servers and employee emails. Over 13 earnings cycles since 2010, the pair correctly predicted stock reactions in 12 instances, typically purchasing out-of-the-money options just before public announcements, with Pugach executing trades in his own account and his mother Bella Pugach’s account, which the SEC named as a relief defendant to facilitate asset recovery. Despite living in different states—McGinnis in Vermont and Pugach in Connecticut—their trades were coordinated through McGinnis’s home internet, and they communicated frequently around earnings dates using not only their own phones but also those of their spouses to evade detection. The SEC alleges violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, along with Rule 10b-5, citing the unusually precise timing of their trades as evidence of insider knowledge. On July 24, the SEC obtained a temporary restraining order and asset freeze from the U.S. District Court for the District of Connecticut, with a hearing scheduled for August 7 to determine further relief. The investigation, led by the SEC’s Denver Regional Office with assistance from the FBI, U.S. Attorney’s Office for the District of Connecticut, and the Options Regulatory Surveillance Agency, remains ongoing, and litigation will be handled by SEC attorneys Dugan Bliss and Greg Kasper.
Exhibits & Attached Documents (1)
Extracted insights
- $7.00M $7 million $1M–$10M
- person bella pugach
- person chad mcginnis
- scheme_term chad mcginnis for insider trading
- person donald hoerl
- person green mountain coffee roasters
- court july 31 in u.s. district court for the district of connecticut
- agency sec's denver regional office
- agency Securities and Exchange Commission
- person sergey pugach
- SEC announced charges against Chad McGinnis for insider trading
- Chad McGinnis was systems administrator at Green Mountain Coffee Roasters
- Chad McGinnis purchased Green Mountain Coffee securities before earnings announcements
- Chad McGinnis tipped Sergey Pugach with inside information
- Sergey Pugach illegally traded in his own account and his mother's trading account
- McGinnis and Pugach garnered $7 million in illegal profits
- McGinnis and Pugach correctly predicted reaction of Green Mountain Coffee stock price to 12 of 13 quarterly earnings announcements since 2010
- SEC filed complaint on July 24
- Complaint unsealed on July 31 in U.S. District Court for the District of Connecticut
- Chad McGinnis lives in Morrisville, Vermont
- Sergey Pugach lives in Hamden, Connecticut
- McGinnis and Pugach violated Section 17(a) of Securities Act of 1933 and Section 10(b) of Securities Exchange Act of 1934 and Rule 10b-5
- Bella Pugach named as relief defendant for recovering ill-gotten gains in her trading account
- Dan Konosky, Scott Mascianica, and Jay Scoggins conducted SEC investigation in Denver Regional Office
- Dugan Bliss and Greg Kasper will litigate the case
- Donald Hoerl is Director of SEC's Denver Regional Office
- Hearing set for August 7
The Securities and Exchange Commission today announced insider trading charges against a former systems administrator at Vermont-based Green Mountain Coffee Roasters who repeatedly obtained quarterly earnings data and traded in advance of its public release. The SEC also charged his friend who illegally traded along with him. In a complaint unsealed July 31 in U.S. District Court for the District of Connecticut, the SEC alleges that Chad McGinnis purchased Green Mountain Coffee securities – typically out-of-the-money options – shortly before earnings announcements were made. McGinnis also tipped his longtime friend and business associate Sergey Pugach, who illegally traded in his own account and his mother’s trading account. Together, McGinnis and Pugach garnered $7 million in illegal profits by using inside information to correctly predict the reaction of Green Mountain Coffee’s stock price to 12 of the past 13 quarterly earnings announcements since 2010. “McGinnis and Pugach exploited confidential company financial data to conduct their insider trading scheme to the detriment of Green Mountain Coffee and its shareholders,” said Donald Hoerl, Director of the SEC’s Denver Regional Office. “The timing of their trades was consistently and exceptionally successful, but their scheme ultimately was not.” The SEC’s complaint was filed under seal on July 24, when the court granted the Commission’s motion seeking a temporary restraining order, asset freeze, and other emergency relief. A hearing has been set for August 7. The SEC alleges that as an information technology employee, McGinnis had access to shared folders on Green Mountain Coffee’s computer server where drafts of pending press releases and earnings announcements were stored. He also had access to other employees’ e-mail accounts. Both sources provided McGinnis with details about upcoming Green Mountain Coffee earnings announcements before they became public. According to the SEC’s complaint, McGinnis lives in Morrisville, Vt., and Pugach lives in Hamden, Conn. Despite living in different states, much of the insider trading in their online brokerage accounts occurred through McGinnis’ home Internet service. They communicated frequently around earnings announcements, but infrequently otherwise. Around trading times, they exchanged numerous phone calls and text messages not only on their own phones, but also using cell phones belonging to their spouses. The SEC’s complaint alleges that McGinnis and Pugach violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Pugach’s mother Bella Pugach is named as a relief defendant in the SEC’s complaint for the purpose of recovering ill-gotten gains in her trading account. The SEC’s investigation, which is continuing, has been conducted by Dan Konosky, Scott Mascianica, and Jay Scoggins in the Denver Regional Office. The case will be litigated by Dugan Bliss and Greg Kasper. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Connecticut, the Federal Bureau of Investigation, and the Options Regulatory Surveillance Agency.
The Securities and Exchange Commission today announced insider trading charges against a former systems administrator at Vermont-based Green Mountain Coffee Roasters who repeatedly obtained quarterly earnings data and traded in advance of its public release. The SEC also charged his friend who illegally traded along with him. In a complaint unsealed July 31 in U.S. District Court for the District of Connecticut, the SEC alleges that Chad McGinnis purchased Green Mountain Coffee securities – typically out-of-the-money options – shortly before earnings announcements were made. McGinnis also tipped his longtime friend and business associate Sergey Pugach, who illegally traded in his own account and his mother’s trading account. Together, McGinnis and Pugach garnered $7 million in illegal profits by using inside information to correctly predict the reaction of Green Mountain Coffee’s stock price to 12 of the past 13 quarterly earnings announcements since 2010. “McGinnis and Pugach exploited confidential company financial data to conduct their insider trading scheme to the detriment of Green Mountain Coffee and its shareholders,” said Donald Hoerl, Director of the SEC’s Denver Regional Office. “The timing of their trades was consistently and exceptionally successful, but their scheme ultimately was not.” The SEC’s complaint was filed under seal on July 24, when the court granted the Commission’s motion seeking a temporary restraining order, asset freeze, and other emergency relief. A hearing has been set for August 7. The SEC alleges that as an information technology employee, McGinnis had access to shared folders on Green Mountain Coffee’s computer server where drafts of pending press releases and earnings announcements were stored. He also had access to other employees’ e-mail accounts. Both sources provided McGinnis with details about upcoming Green Mountain Coffee earnings announcements before they became public. According to the SEC’s complaint, McGinnis lives in Morrisville, Vt., and Pugach lives in Hamden, Conn. Despite living in different states, much of the insider trading in their online brokerage accounts occurred through McGinnis’ home Internet service. They communicated frequently around earnings announcements, but infrequently otherwise. Around trading times, they exchanged numerous phone calls and text messages not only on their own phones, but also using cell phones belonging to their spouses. The SEC’s complaint alleges that McGinnis and Pugach violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Pugach’s mother Bella Pugach is named as a relief defendant in the SEC’s complaint for the purpose of recovering ill-gotten gains in her trading account. The SEC’s investigation, which is continuing, has been conducted by Dan Konosky, Scott Mascianica, and Jay Scoggins in the Denver Regional Office. The case will be litigated by Dugan Bliss and Greg Kasper. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Connecticut, the Federal Bureau of Investigation, and the Options Regulatory Surveillance Agency.