SEC is indicting three of them for insider trading in connection with the company “Pivot” on the blockchain
July 13, 2021
Cadwalader, Wickersham & Taft LLP
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The SEC has charged three people with an insider trading scheme that disclosed confidential information related to the relocation of a soft drinks company to its main business “to explore and invest in opportunities that take advantage of blockchain technology.”
In a complaint filed in the U.S. District Court for the Southern District of New York City, the SEC alleged that the company’s major shareholder provided a real estate agent with material non-public information about the business relocation announcement and that the agent in turn tipped a co-conspirator who owned 35,000 shares in the Company has bought. The company announced the announcement the following day, causing its intraday share price to jump 388 percent. The SEC stated that within two hours of the announcement, the co-conspirator had sold all of the shares it had bought the previous day and made a profit of $ 162,500.
The complaint alleges that the individuals violated Section 10 (b) of the Stock Exchange Act and SEA Rule 10b-5 (“Use of manipulative and misleading devices”).
The SEC requires (i) permanent injunctions, (ii) levies, (iii) civil fines, and (iv) a managing partner for the controlling shareholder.
Commentary Steven Lofchie
While the process may seem straightforward at the time, the issuer ultimately failed to make the transition from soft drinks maker to blockchain technology company.
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