Napkin-eating broker at center of $5.6m insider trading scheme avoids jail time

A stockbroker who helped orchestrate a multimillion-dollar insider-dealing scheme by passing on secret tips written on napkins – before eating them – will be spared jail, the Securities and Exchange Commission (SEC) said on Monday.

Frank Tamayo acted as middleman in the $5.6m scheme by collecting insider information written down on napkins, which he allegedly took to show another broker at Grand Central station. Once the second broker had memorised the information – usually stocks ticker symbols – Tamayo would eat the paper to dispose of the evidence.

Tamayo, 41, from Brooklyn, who had already pleaded guilty his role in the fraud, was on Monday told he would escape jail time in return for giving back $1m of ill-gotten gains and his Audi Q7, and agreeing to testify against his friends who ran the scheme.

As middleman, Tamayo allegedly collected information from Steven Metro, a corporate lawyer and a law school classmate of Tamayo, at Manhattan bars. Metro, a clerk at Simpson Thacher & Bartlett, allegedly provided market-sensitive information about his firm’s clients written on napkins and and Post-it notes.

“The SEC alleged that after receiving the tips from the law firm clerk, Tamayo typically met the stockbroker near the clock at the information booth at Grand Central and chewed up or ate Post-it notes or napkins after using them to show the stockbroker the ticker symbol of the company that would be acquired,” the SEC said on Monday.

“The stockbroker [Vladimir Eydelman of Morgan Stanley] then traded for himself, Tamayo and other customers.”

The scheme allegedly allowed the group to make profits of more $5.6m dealing in the shares of about a dozen companies in the days before major deals were publicly announced over a five-year period.

Tamayo could have faced up to 20 years in prison, but the SEC agreed a non-custodial penalty in return for his “extensive cooperation” with the investigation.

Robert Cohen, co-deputy chief of the SEC enforcement division’s market abuse unit, said: “Tamayo benefited from his decision to cooperate promptly with the SEC, enter into our cooperation programme, and provide significant information that assisted our investigation.”

Metro and Eydelman, who have both been fired by their employers, did not immediately respond to requests for comment.

Powered by article was written by Rupert Neate in New York, for on Monday 13th July 2015 20.17 Europe/ © Guardian News and Media Limited 2010


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