SEC Junks Herbalife Insider-Trading Case

Dec 16 2014 | 10:37am ET

The Securities and Exchange Commission has dropped its insider-trading case against a man accused of trading on advance knowledge of Pershing Square Capital Management’s planned attack on Herbalife.

The regulator in October accused Jordan Peixoto of making nearly $50,000 in illicit profits after learning from a friend who lived with a Pershing Square analyst of the hedge fund’s intention. But both the roommate, who settled with the SEC, and the former analyst, Mariusz Adamski, have moved back to their native Poland and do not plan to return to the U.S., the SEC said.

The agency said that without their testimony, it cannot proceed with the case.

According to the SEC, Adamski’s roommate, Filip Szymik, pieced together Pershing Square’s plan to accuse Herbalife of running a pyramid scheme from Adamski’s long hours and comments. Adamski is not accused of having directly tipped Szymik and was not charged with any wrongdoing.

Even with both men available to testify, the SEC’s work was cut out for it following last week’s court ruling that restricts the scope of what constitutes insider-trading. Indeed, Szymik’s lawyer said he has contacted the SEC to reopen his settlement.

“As the ruling in Newman makes crystal clear, Mr. Szymik did not commit insider-trading,” Paul Ryan told The New York Times. “We have urged the SEC to do the right thing and void the settlement. We are considering what avenues of redress may be available to him.”

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