CHARLOTTE, N.C. (CN) - A Charlotte-based investment banker led an inside trading ring that made more than $11 million from his inside information about impending mergers, the SEC claims in court.
The SEC sued John W. Femenia, nine other people and two businesses, in Federal Court.
It claims that Femenia misused his position at Wells Fargo Securities to get nonpublic information about four mergers involving Wells Fargo clients, then tipped his longtime friend Shawn Hegedus, a registered broker. The two men then tipped other friends and family members in five states, according to the SEC.
"Beginning as of at least March 2010 and continuing through at least July 2012, defendants engaged in a massive, serial insider trading scheme obtaining at least $11 million in illicit trading profits through the operation of an insider trading ring that traded in advance of the public announcement of least four mergers and acquisitions (collectively, 'Business Combinations') based upon material, nonpublic information misappropriated by Defendant John W. Femenia," the SEC says in its 47-page complaint.
The complaint continues: "In breach of his duty of confidentiality to Wells Fargo Securities, LLC ('Wells Fargo Securities') and its clients, Femenia misappropriated 'inside' information about the Business Combinations and supplied or 'tipped' it to three personal friends who traded on the inside information themselves: (a) defendant Shawn C. Hegedus ('Hegedus'), who traded on the information with his girlfriend defendant Danielle C. Laurenti ('Laurenti') through two entities they own and control, defendant Coram Real Estate Holdings, Inc. ('Coram Real Estate') and defendant GoldStar P.S. Inc. ('GoldStar P.S.'); (b) defendant Matthew J. Musante ('Matthew Musante'); and defendant Aaron M. Wens ('Wens').
"Shortly after receiving the inside information from Femenia, Hegedus tipped the information further to his business colleague, defendant Roger A. Williams ('Williams') who himself traded on the inside information and who, in turn, further tipped his friends, defendants Kenneth M. Raby ('Raby'), Frank M. Burgess, Jr. ('Burgess') and James A. Hayes, IV ('Hayes'), all of whom also traded on the inside information (the 'Femenia-Hegedus-Williams Chain').
"Shortly after receiving the inside information, Matthew Musante also tipped the information further to his father, defendant Anthony C. Musante ('Anthony Musante') who himself also traded on the inside information in a TD Ameritrade brokerage account jointly held with his wife, relief defendant Christine E. Musante ('Christine Musante') (the 'Femenia-Hegedus-Musante Chain')."
Some of the defendants kicked back some of their illegal profits to Femenia, Hegedus and/or Matthew Musante, the SEC says.
It seeks disgorgement and penalties.
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