Mark K. Schonfeld Coments On International Insider Trading Ring


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Mark K. Schonfeld Coments On International Insider Trading Ring

"This case demonstrates that despite all the advances in technology and electronic security, businesses remain as vulnerable to infiltration as the people they employ."

U.S. Securities and Exchange Commission

Securities and Exchange Commission

This investigation began, as many investigations begin, with a phone call. On August 3, 2005, Reebok announced an agreement to be acquired by Adidas, causing Reebok stock price to jump 30%. That afternoon, I received a call from the SEC?s Office of Market Surveillance in Washington. They had detected an unusual volume of trading in Reebok call options in the days leading up to Reebok?s announcement.

Within 24 hours, attorneys and investigators in our office had traced some of the trading across the Atlantic and back again and uncovered that the trading was unusual for more than its volume. Among other things, it seemed that a 63 year old retired seamstress in Croatia named Sonja Anticevic, trading through an online broker in the United States, had made over $2 million buying Reebok options just before the announcement ? realizing a nearly 17-fold return on a two-day investment. Ms Anticevic, it seemed, was either the most successful investor in the history of Wall Street, or part of something highly nefarious. Within 48 hours of the merger announcement, we were in federal court obtaining an order to freeze the proceeds of that trading.

Less than two weeks later, we had traced the trading to eight more individuals and accounts in the United States and Europe, including an individual residing in New Jersey named David Pajcin -- Ms. Anticevic?s nephew. We immediately went back to court to charge the additional defendants and to obtain an order freezing a total of $6 million in trading proceeds. By that point, we had also uncovered suspicious contemporaneous trading in other stocks in these accounts.

Over the next several months, our investigation uncovered one of the most widespread, varied, and premeditated insider trading rings we have ever prosecuted. Today we have submitted to the Court our third complaint in this case, bringing to 13, the total number of defendants charged in this insider trading scheme.

At the center of this scheme were defendants Eugene Plotkin, an analyst with Goldman Sachs, and David Pajcin, a former analyst at Goldman Sachs. In one scheme, Plotkin and Pajcin persuaded defendant Stanislav Shpigelman, a mergers and acquisitions analyst at Merrill Lynch, to provide tips on upcoming mergers in return for a share of the trading profits. In another scheme, Plotkin and Pajcin recruited defendants Nickolaus Shuster and Juan Renteria to obtain jobs at a printing plant in Wisconsin, steal advance copies of Business Week magazine and tip Plotkin and Pajcin on the names of companies discussed favorably in the ?Inside Wall Street? column before the magazine became available to the public.

Plotkin and Pajcin traded on the inside information, initially in an account in Pajcin?s name. Then, in an effort to hide their trading, they traded in accounts in the names of others in Europe and the United States, including Pajcin?s Croatian aunt and an account in the name of a friend, defendant Monika Vujovic, an ?exotic dancer? in New York City. In order to profit further from the inside information, Plotkin and Pajcin also tipped other individuals in the United States and Europe, who in turn traded on the information, and agreed to share their profits with Plotkin and Pajcin. In total, Plotkin and Pajcin traded in at least 25 stocks within one year based on inside information obtained through these schemes.

The defendants in the SEC?s civil case include the individuals who have been charged criminally by the United States Attorney, as well as eight additional individuals who were either tipped by one or more of the defendants or who permitted their accounts to be used for insider trading in return for a share of the profits. The additional defendants in the SEC?s action are Ms. Anticevic, Pajcin?s aunt in Croatia, Mikhail Plotkin, the father of defendant Eugene Plotkin, Monika Vujovic of New York City, Henry Siegel of Pamona, New York, Elvis Santana of Brooklyn, Perica Lopandic, a German national, and Zoran Sormaz and Ilija Borac, both Croatian nationals.

This case demonstrates that despite all the advances in technology and electronic security, businesses remain as vulnerable to infiltration as the people they employ. In this case, at the same time Plotkin and Pajcin carried out these schemes, they were in the process of trying to find other individuals at prominent investment banks who would be willing to provide similar tips in return for a share of trading profits. They even contemplated using exotic dancers to obtain confidential information from investment banker clientele.

In closing, I would like to recognize the tremendous job done by the SEC staff on these investigations, including David Rosenfeld, David Markowitz, Scott Black, Sanjay Wadhwa, Wendy Griffin, Mona Akhtar, Brenda Chang, Melissa Coppola, Elizabeth Baier, Kathy Murdocco and Roseann Daniello. I would also like to thank United States Attorney Michael Garcia and the United States Attorney?s Office and the FBI for their assistance and commitment to this investigation. I would also like to acknowledge the assistance of the Financial Supervisory Authority in Denmark, the Financial Market Authority in Austria, the Croatian Securities Commission, and the Financial Services Authority in the United Kingdom.

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