SEC v. Matthew G. Teeple; David T. Riley; and John V. Johnson, No. LR-22660, Southern District of New York (Mar. 26, 2013) — Press Release
raw: Matthew G. Teeple, David T. Riley, and John V. Johnson
Matthew G. Teeple, David T. Riley, and John V. Johnson, No. LR-22660 (S.D.N.Y. Mar. 26, 2013)
Matthew Teeple, David Riley, and John Johnson were charged with a $29 million insider trading scheme involving nonpublic information about Brocade's 2008 acquisition of Foundry Networks, with the outcome pending.
The SEC alleged that Teeple, a California-based hedge fund analyst, received nonpublic information from Riley, Foundry's chief information officer, about the acquisition and used it to make profitable trades, resulting in millions of dollars in profits. The scheme involved at least three major announcements by Foundry, including the merger announcement, a delayed shareholder vote, and an earnings forecast. The defendants were charged with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.
The U.S. Securities and Exchange Commission charged Matthew Teeple, a California-based hedge fund analyst, David Riley, Foundry Networks' chief information officer, and John Johnson, a Denver-based investment professional, with insider trading in a $29 million scheme tied to nonpublic information about Brocade's 2008 acquisition of Foundry Networks. Riley, Teeple's friend and source, provided tip-offs on multiple material events, including the merger announcement, a delayed shareholder vote, and an earnings forecast, enabling Teeple and his firm to execute profitable trades. Teeple further passed the information to Johnson, who also traded illegally. The SEC alleged that the defendants generated millions in illicit profits, with Foundry's stock surging 32% after the public merger announcement on July 21, 2008. The SEC's complaint seeks disgorgement of ill-gotten gains, prejudgment interest, civil penalties, and permanent injunctions against future violations, including barring Riley from serving as a public company officer or director. The defendants were charged with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Criminal charges were also filed by the U.S. Attorney's Office for the Southern District of New York.
Extracted insights
- $3.00B $3 billion ≥$1B
- $940.00M $940 million $100M–$1B
- $29.00M $29 million $10M–$100M
- person matthew g. teeple
- SEC charged Matthew G. Teeple, David T. Riley, and John V. Johnson with insider trading
- Matthew G. Teeple received nonpublic information from his friend who was an executive at a technology company
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 22660 / March 26, 2013 SEC v. Matthew G. Teeple, David T. Riley, and John V. Johnson, Civil Action No. 13-CV-2010 (SDNY) (PAC) SEC Charges California-Based Hedge Fund Analyst and Two Others with Insider Trading On March 26, 2013, the Securities and Exchange Commission charged a California-based hedge fund analyst with insider trading in advance of a merger of two technology companies based on nonpublic information he received from his friend who was an executive at one of the companies. The SEC also charged the executive and another trader in the $29 million insider trading scheme. The SEC alleges that Matthew Teeple of San Clemente, Calif., was tipped in advance of a July 2008 announcement that Foundry Networks Inc. had agreed to be acquired by Brocade Communication Systems Inc. for approximately $3 billion. Teeple's source was Foundry's chief information officer David Riley, a friend who he had previously given investment advice. Teeple then caused the San Francisco-based hedge fund advisory firm where he works to buy Foundry shares in large quantities in the days leading up to the public announcement, and the hedge funds managed by the firm reaped millions of dollars in profits when Foundry's stock value increased upon the news. Teeple also tipped a Denver-based investment professional John Johnson who he befriended through a previous working relationship, and Johnson made illegal trades based on the nonpublic information. Riley also tipped Teeple in advance of at least two other major announcements by Foundry, and Teeple's firm traded on the nonpublic information to make profits or avoid losses. In a separate action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against Teeple, Riley, and Johnson. According to the SEC's complaint filed in federal court in Manhattan, Riley tipped Teeple on the morning of July 16 about Brocade's impending acquisition of Foundry. Teeple immediately shared this information with colleagues at his firm as well as Johnson and several others who purchased Foundry stock, often within minutes of communicating with Teeple. Foundry stock climbed approximately 32 percent after the public announcement of the merger on July 21. The SEC alleges that Riley, who lives in San Jose, Calif., continued to provide material nonpublic information to Teeple about key events throughout the process of Foundry's acquisition by Brocade, which was not fully completed until Dec. 18, 2008. Teeple's firm continued to profitably trade Foundry securities based on this inside information. For example, Riley tipped Teeple in advance of an October 24 announcement that Foundry's shareholder vote to approve the acquisition would be delayed "given recent developments related to the transaction." Earlier in 2008, Riley tipped Teeple in advance of Foundry's April 11 earnings forecast so Teeple's firm could profitably trade in advance of the announcement. The SEC's complaint charges Teeple, Riley, and Johnson with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks a final judgment ordering them to disgorge their ill-gotten gains plus prejudgment interest, ordering them to pay financial penalties, and permanently enjoining them from future violations of these provisions of the federal securities laws. The complaint also seeks to permanently prohibit Riley from serving as an officer or director of a public company. Since October 2009, the SEC has charged more than 430 individuals and entities with insider trading. The defendants in these cases are alleged to have made $940 million in illicit profits and losses avoided.
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 22660 / March 26, 2013 SEC v. Matthew G. Teeple, David T. Riley, and John V. Johnson, Civil Action No. 13-CV-2010 (SDNY) (PAC) SEC Charges California-Based Hedge Fund Analyst and Two Others with Insider Trading On March 26, 2013, the Securities and Exchange Commission charged a California-based hedge fund analyst with insider trading in advance of a merger of two technology companies based on nonpublic information he received from his friend who was an executive at one of the companies. The SEC also charged the executive and another trader in the $29 million insider trading scheme. The SEC alleges that Matthew Teeple of San Clemente, Calif., was tipped in advance of a July 2008 announcement that Foundry Networks Inc. had agreed to be acquired by Brocade Communication Systems Inc. for approximately $3 billion. Teeple's source was Foundry's chief information officer David Riley, a friend who he had previously given investment advice. Teeple then caused the San Francisco-based hedge fund advisory firm where he works to buy Foundry shares in large quantities in the days leading up to the public announcement, and the hedge funds managed by the firm reaped millions of dollars in profits when Foundry's stock value increased upon the news. Teeple also tipped a Denver-based investment professional John Johnson who he befriended through a previous working relationship, and Johnson made illegal trades based on the nonpublic information. Riley also tipped Teeple in advance of at least two other major announcements by Foundry, and Teeple's firm traded on the nonpublic information to make profits or avoid losses. In a separate action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against Teeple, Riley, and Johnson. According to the SEC's complaint filed in federal court in Manhattan, Riley tipped Teeple on the morning of July 16 about Brocade's impending acquisition of Foundry. Teeple immediately shared this information with colleagues at his firm as well as Johnson and several others who purchased Foundry stock, often within minutes of communicating with Teeple. Foundry stock climbed approximately 32 percent after the public announcement of the merger on July 21. The SEC alleges that Riley, who lives in San Jose, Calif., continued to provide material nonpublic information to Teeple about key events throughout the process of Foundry's acquisition by Brocade, which was not fully completed until Dec. 18, 2008. Teeple's firm continued to profitably trade Foundry securities based on this inside information. For example, Riley tipped Teeple in advance of an October 24 announcement that Foundry's shareholder vote to approve the acquisition would be delayed "given recent developments related to the transaction." Earlier in 2008, Riley tipped Teeple in advance of Foundry's April 11 earnings forecast so Teeple's firm could profitably trade in advance of the announcement. The SEC's complaint charges Teeple, Riley, and Johnson with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks a final judgment ordering them to disgorge their ill-gotten gains plus prejudgment interest, ordering them to pay financial penalties, and permanently enjoining them from future violations of these provisions of the federal securities laws. The complaint also seeks to permanently prohibit Riley from serving as an officer or director of a public company. Since October 2009, the SEC has charged more than 430 individuals and entities with insider trading. The defendants in these cases are alleged to have made $940 million in illicit profits and losses avoided.