The SEC resolved two Galleon related insider trading
cases. One involved Robert Feinblatt, a co-founder and former principal of
hedge fund Trivium Capital Management LLC. SEC v. Feinblatt, Civil
Action No. 11-CV-0170 (S.D.N.Y.). The other was against Anthony Scolaro, a
former portfolio manager at hedge fund investment adviser Diamondback Capital
Management, LLC. SEC v. Scolaro, Civil Action No. 11-CV-6112 (S.D.N.Y.).
The action against Mr. Feinblatt alleged that he and Jeffrey
Yokuty, formerly an analyst who reported to him, traded in inside information
in the shares of Polycom, Hilton, Google and Kronos. The two defendants
obtained the inside information from Roomy Khan, a figure involved in other
Galleon insider trading cases. Ultimately the information traced to Polycom
senior executive Sunil Bhalla and Shammara Hussain, an employee at investor
relations consulting firm Market Street Partners that did work for Google.
Mr. Feinblatt settled with the SEC by consenting to the
entry of a permanent injunction enjoining him from future violations of
Securities Act Section 17(a) and Exchange Act Section 10(b). Mr. Feinblatt also
agreed to pay disgorgement of $829,765 along with prejudgment interest and a
civil penalty of $1,659,530. In a separate administrative proceeding Mr.
Feinblatt consented to be barred from the securities business with a right to
reapply after five year. Mr. Yokuty previously settled with the SEC on similar
terms while agreeing to pay disgorgement of $127,595.10 along with prejudgment
interest and a civil penalty in an amount equal to the disgorgement. He also
resolved a related administrative proceeding on similar terms but with a right
to apply for reentry after three years.
The action against Mr. Scolaro ties to the Arthur Cutillo
and Brien Santarias side of the Galleon investigation. Messrs. Cutillo and
Santarias were formerly associates at the law firm of Ropes & Gray LLP.
They misappropriated material, non-public information concerning the acquisition
of Axcan from their firm. The information was furnished through another
attorney to Zvi Goffer, a proprietary trader at broker dealer Schottenfeld
Group LLC, who traded on it. Mr. Goffer then furnished the information to Franz
Tudor, another trader at his firm who in turn provided it to his friend Mr.
Scolaro who traded on behalf of hedge fund Diamondback yielding about $1.1
million in illegal profits.
Mr. Scolaro resolved the case with the SEC by consenting
to the entry of a final judgment that permanently enjoins him from future
violations of Exchange Act Section 10(b) and requires him to pay disgorgement
of $125,980 along with prejudgment interest and a civil penalty of $62,945.
Diamondback, named as a relief defendant, consented to the entry of an order requiring
the payment of $962,486 in disgorgement along with prejudgment interest. Mr.
Scolaro also consented to the entry of an order in an administrative proceeding
barring him from the securities business. Previously he pleaded guilty to
charges of conspiracy to commit securities fraud and securities fraud in a
related criminal case. U.S. v. Scolaro, 11-CR-429 (S.D.N.Y.). He is
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