The Securities and Exchange Commission filed insider trading charges against Sean Wygovsky, a former trader at a Canadian asset management firm, and Christopher Matthaei, a former partner at a U.S. broker-dealer, for using nonpublic information in advance of at least seven merger announcements involving Special Purpose Acquisition Companies (SPACs) to earn illicit profits of more than $3.4 million.
The SEC’s complainthttps://www.sec.gov/litigation/complaints/2023/comp-pr2023-66.pdf alleges that Wygovsky learned material non-public information about upcoming SPAC mergers from his employer’s involvement in transactions related to the mergers. The complaint also alleges that, from May 2020 through April 2021, Wygovsky used encrypted messaging to tip his close friend and trading client, Matthaei, about the upcoming mergers. According to the complaint, Matthaei, who ran a trading and research group focused on SPACs during the relevant period, allegedly traded on Wygovsky’s tips.
“As alleged in our complaint, the defendants, both industry professionals, abused their positions to repeatedly trade inside information and profit from it in the active SPAC market,” said Nicholas P. Grippo, Director of the SEC’s Philadelphia Regional Office. “It is especially disappointing to see a trader and a broker-dealer resort to tactics like using encrypted communications to flaunt the rules designed to protect investors and the markets.”
The SEC’s complaint, filed in the United States District Court for the District of New Jersey, charges Wygovsky and Matthaei with violating the antifraud provisions of the federal securities laws and seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against Matthaei and Wygovsky, and an officer and director bar against Matthaei. Wygovsky has consented to a bifurcated settlement, subject to court approval, under which he will be permanently enjoined from violating the federal securities laws. The SEC previously charged Wygovsky with perpetrating a lucrative front running scheme, and Wygovsky consented to a bifurcated settlement in that matter as well.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Matthaei.
The SEC’s ongoing investigation was conducted by Kevin E. Levenberg and Brian R. Higgins of the Philadelphia Regional Office, with assistance by John S. Rymas of the Market Abuse Unit. It was supervised by Brendan P. McGlynn, Scott A. Thompson, and Mr. Grippo. Karen M. Klotz and Gregory Bockin will lead the litigation. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of New Jersey, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.
Jeffrey Newman is a whistleblower lawyer who handles SEC and CFTC whistleblower cases as well as cases under the False Claims Act for healthcare fraud. He can be reached at Jeff@JeffNewmanLaw or at 617-823-3217. www.JeffNewmanLaw.com is the firm’s website.
