A technology project consultant working for a New York City bank is on trial for allegedly passing on confidential information to friends, who used it to earn millions from insider trading activities.
The United States Securities and Exchange Commission (SEC) alleges [pdf] that Daniel Rivas from New Jersey wrote down information from an unnamed bank's computer systems on paper slips, and passed it onto four friends through his girlfriend.
Rivas' friends - who are on trial with him - used the information for insider trading of shares and options in public companies, earning millions in the process over a period of two years, the SEC claims.
One of the people involved in the scam was 60-year-old James Moodhe, the father of Rivas' girlfriend, who on one occasion allegedly profited by more than US$2 million (A$2.51 million).
Moodhe in turn passed on Rivas' tips to a financial adviser friend who conducted trades for his clients, again making large profits, the SEC claimed.
As the scam spread to friends of friends of Rivas, SEC says some of the traders were unaware of each others' activities. This led to them trading in parallel with each other, based on the tips that Rivas passed on.
The securities watchdog became suspicious after a string of trades resulted in very high profits on comparatively low investment.
Rivas had been prohibited from disclosing the confidential information in the computer systems he had access to, and had taken training courses for the bank's code of ethics, the SEC said.
It is seeking the return of the profits made, with interest. The individuals face fines and possibly jail sentences for the alleged insider trading.
