An expensive watch, shell companies and fake invoices: How two Israeli traders tapped into a $100M global biotech insider trading ring
It appears that we have reached the end of the saga about the global insider trading ring that collectively reaped $100 million from placing “timely, profitable” trades in biotech stocks like Ariad, Pharmacyclics and Receptos.
Tomer Feingold and Dov Malnik — Israeli traders living in Switzerland — were the last out of eight to be charged as the SEC unraveled the scheme, which ran from 2013 through 2017. Together, according to a statement in March, the pair had pocketed more than $4 million.
Their indictment, which was unsealed Thursday, offered another look at the web of connections, and how information and payments traveled on it.
Feingold and Malnik first got in on the network in the summer of 2013 when they met someone identified as co-conspirator 4, or CC-4 — whose attributes matched the description for a Geneva-based trader by the name of Marc Demane-Debih who had been arrested in Serbia, pleaded guilty and is working with authorities (Demane-Debih said he personally got $70 million from all the insider trading). He talked about “numerous sources” of material secret information that he could share with them if they strike a deal.
In return, FEINGOLD and MALNIK agreed to compensate CC-4 by buying additional securities on CC-4’s behalf and transmitting the profits from those trades to CC-4. This trading by- FEINGOLD, MALNIK, and CC-4 included the purchase and sale of U.S.-exchange traded securities as well as overseas securities of the relevant target companies that traded on foreign exchanges.
CC-4 went on to feed them insider news he obtained via other people. The first was updates about Ariad from someone who had a closer personal friendship with a board member and his close relative. Per previous disclosure, that someone would be George Nikas, a businessman who owned a Greek restaurant chain in New York and got tipped off by Telemaque Lavidas, the son of Ariad board director Athanase Lavidas.
Then came information about upcoming acquisitions stolen from “Investment Bank A” by CC-2, who was working in the London office. She was in a romantic relationship and living with CC-1 and the couple would pass confidential tips to CC-3, their close friend, who repaid them with over $1 million worth of “cash, hotel rooms and dinners, luxury watches and expensive clothes.”
Again, the trio had been named in previous reports as Darina Windsor (who was working at Centerview), Benjamin Taylor and Joseph El-Khouri.
Starting in 2015, CC-4 got a new contact at “Investment Bank B” — likely Bryan Cohen of Goldman Sachs — who also shared insider information in exchange for cash.
Through it all, Feingold, Malnik and CC-4 tried to cover their tracks by communicating on encrypted messaging applications and “burner” cellphones. Feingold and Malnik went as far as setting up off-shore shell companies to carry out trading and bank transfers.
At one point, when their banks began to flag the wire instructions and question why they were sending money to an account controlled by CC-4, they arranged with CC-4 to “issue fake invoices for consulting services to FEINGOLD and MALNIK’ s various offshore entities.” Those “services” called for payments of $700,000 and $1,350,000 in two separate instances.
Cash wasn’t the only currency that went around in this loosely connected group. From the indictment:
In or about 2013, MALNIK bought an expensive watch for CC-4 in exchange for CC-4 having provided MALNIK with MNPI , which watch was delivered to an associate of CC-4 in Manhattan, New York.