A divided Second Circuit panel recently bolstered the Securities and Exchange Commission’s ability to extract potentially enormous sums from defendants in securities fraud cases. Specifically, the court decided in SEC v. Contorinis that a defendant in an insider trading case can be forced to disgorge not only the illicit profits he personally earned, but also the illegal profits earned by an innocent third party that the defendant did not control.1 One particularly interesting aspect of this decision is that a different Second Circuit panel in the parallel criminal case vacated the forfeiture order against the same defendant because the forfeiture amount went beyond what the defendant personally obtained from the illegal conduct.
The defendant in both cases, Joseph Contorinis, was a managing director at Jeffries & Company, Inc. and was the co-manager of Jeffries Paragon Fund (the fund). Contorinis had the ability to make investment decisions on behalf of the fund, but did not have any control over the disbursement of the money earned by it. The defendant committed insider trading by executing several trades on behalf of the fund based on material nonpublic information he received from a UBS banker about an acquisition of the supermarket chain Albertson’s Inc. These illegal trades caused the fund to earn $7.3 million in profits and to avoid $5.3 million in losses.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]