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Morgan Stanley, Ex-Bank of America Employees Charged in Insider Trading Ring

A former BAML IT worker abused his access to the investment banking division’s computer system, the SEC alledged Wednesday, and claimed his tips on future M&A activity spawned years of illicit transactions.

  • Alicia McElhaney

A former BAML IT worker abused his access to the investment banking division’s computer system, the SEC alledged Wednesday, and claimed his tips on future M&A activity spawned years of illicit transactions.

The Securities and Exchange Commission charged seven people Wednesday with allegedly participating in an insider trading ring.

Daniel Rivas — a former IT employee at Bank of America Merrill Lynch — was the center of the alleged scheme, regulators said.

Rivas, who had access to Bank of America’s computer system, is accused of using it to tip off four individuals on upcoming mergers and acquisitions. The four then used the information to make major trades in the days leading up to the announcement of the deals, and passed tips to others, the SEC, who also traded on them.

“IT employees are often entrusted with broad access to incredibly valuable, nonpublic information and have a duty to safeguard that information.” said Jina Choi, director of the SEC’s San Francisco Regional Office, in a statement.

[II Deep Dive: The SEC’s New Challenge: Faster Investigations]

A Bank of America spokesperson told II, “We fired Mr. Rivas in April and have cooperated fully with the authorities on this matter.”

Among those Rivas allegedly shared information with was his girlfriend’s father, James Moodhe, who, according to LinkedIn, worked as an assistant controller and treasurer at financial services firm Tullett Prebon until May 2017.

Moodhe allegedly went on to share that information, as well as make trades, with his friend Michael Siva, a Morgan Stanley financial adviser based in New Jersey.

Siva allegedly used that information to trade on behalf of his brokerage clients, earning commissions for himself in the process and more than $880,000 in illicit profits for clients, according to the SEC. Siva also allegedly used the information to make at least two trades on behalf of himself and his wife,

A Morgan Stanley spokesperson said that Siva is now on administrative leave.

“The alleged conduct is a gross violation of our internal policies and our company’s values,” Margaret Draper, vice president of corporate communications said via email.

In addition to allegedly feeding information to Moodhe and Siva, the SEC also said Rivas shared trading tips with two Florida-based friends, Roberto Rodriguez and Rodolfo Sablon, who then allegedly discussed the tips on an “encrypted, self-destructing smartphone messaging application.”

“Although Rodriguez and Sablon were inexperienced traders, in just over a year they turned less than $100,000 into more than $2 million in profits by making aggressive options trades based on the confidential information,” the regulators said in its press release.

The Florida pair allegedly set up shell companies to carry out the trades.

“The tippers and traders in this case are alleged to have used various methods to try to cover their tracks, but their efforts failed,” said Steven Peikin, co-director of the SEC Enforcement Division.

All seven individuals have been charged with fraud.