A hedge fund analyst and his alleged tipster were arrested and charged yesterday with insider-trading.
Prosecutors said that Matthew Teeple, an analyst for an unidentified San Francisco hedge fund, was told of Foundry Networks' impending acquisition by Brocade Systems in 2008 by Foundry's then-chief information officer, David Riley. Both men were charged with conspiracy and securities fraud and face up to 65 years in prison.
Riley's tip helped Teeple's hedge fund earn more than $16 million and avoid losses of more than $11 million. Teeple then passed the information to two other men, both of whom have pleaded guilty: John Johnson, a portfolio manager for a Denver asset manager who entered his plea on March 18, and Karl Motey, a key government cooperating witness who played a major role in the crackdown at expert-network Primary Global Research.
"There may be little to distinguish this case from the dozens of others we have made against industry insiders and investment advisers in the past several years," George Venizelos of the Federal Bureau of Investigation said. "There is certainly nothing unique about the outcome: If you allegedly traffic in inside information, by providing it or trading on it, you will inevitably be found out, charged, and prosecuted."
Teeple, Riley and Johnson were also sued by the Securities and Exchange Commission.
Teeple and Riley where both arrested in California yesterday. "Mr. Teeple intends to vigorously defend himself against the government's allegations," Teeple's lawyer said.