The Securities and Exchange Commission (SEC) on Thursday brought insider trading charges against two individuals for allegedly using non-public information to profit from at least seven merger announcements involving special purpose acquisition companies (SPACs).
What Happened: Sean Wygovsky, a former trader at a Canadian asset management firm, and Christopher Matthaei, a former partner at a U.S. broker-dealer, earned illicit profits of over $3.4 million through illegal trading activities, according to the complaint filed by the SEC.
Wygovsky allegedly learned material non-public information about upcoming SPAC mergers through his employer’s involvement in financing transactions related to the mergers.
He then used the encrypted messaging service Telegram to tip off his close friend and trading client, Matthaei, about the upcoming mergers. Matthaei, who ran a trading and research group focused on SPACs during the relevant period, allegedly traded on Wygovsky’s tips.
The SEC’s complaint accuses the defendants of abusing their positions as industry professionals to repeatedly trade inside information and profit from it in the active SPAC market.
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“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,” said Nicholas Grippo, director of the SEC’s Philadelphia Regional Office.
The SEC is seeking 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 consented to a legal agreement where he will be permanently banned from breaking any laws related to buying and selling stocks. However, the court still needs to approve the agreement.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey announced criminal charges against Matthaei.
The companies the pair traded on include:
- Hyliion Holdings Corp HYLN
- dMY Technology Group Inc VI DMYS
- Otonomo Technologies Ltd OTMO
- Moneylion Inc ML
- Archer Aviation Inc ACHR
- Origin Materials Inc ORGN
- Healthcare Merger Corp. (which merged with SOC Telemed in 2020, then went private in 2022).
Photo: Shutterstock
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