SEC Busts Coffee Man for Inside Trades

     HARTFORD (CN) – An insider at Green Mountain Coffee Roasters tipped a crony to inside information from which the two men made more than $7 million by illegally trading ahead on earning announcements, the SEC claims in court.
     The SEC sued Chad C. McGinnis, the insider, and his pal Sergey Pugach, in Federal Court. It sued Pugach’s mother, Bella Pugach, as a relief defendant.
     Green Mountains Coffee Roasters is not a party to the complaint.
     “This case involves a nefarious insider-trading scheme executed by defendants,” the lawsuit states. “McGinnis used his position as a corporate insider at Green Mountain Coffee Roasters, Inc. (‘GMCR’) to obtain material, nonpublic information ahead of earnings announcements. Using this information, McGinnis purchased GMCR securities – usually out-of-the-money options – shortly before the earnings announcements were made public, then sold them after the announcements. McGinnis also tipped his long-time friend and business associate Pugach with this same information. Pugach in turn made similar trades. Together, McGinnis and Pugach profited by well over $7 million between 2010 and 2013 from these illegal trades.
     “Because of their inside information, McGinnis and Pugach’s trades were consistently and exceptionally successful. For 12 out of 13 quarters of earnings announcements, they made profitable trades based on high-risk bets of immediate and sharp stock price movement. They communicated frequently around earnings announcements – but infrequently otherwise – and traded in both of their brokerage accounts from the same location. McGinnis and Pugach exploited McGinnis’s access to material, nonpublic information to conduct their insider-trading scheme to the detriment of GMCR and its shareholders.”
     McGinnis, 35, of Morrisville, Vt., is a system administrator for the coffee company.
     Pugach, 34, of Hamden, Conn., went to Fairfield University with McGinnis, and worked with him at another company in Connecticut.
     McGinnis made “well over $2 million” and Pugach “well over $5 million” from their illegal trades, the SEC claims in the complaint.
     Trades made in the name of Pugahc’s mother made almost $40,000 in profits, the SEC claims.
     Nonparty Green Mountain Coffee Roasters, which is not accused of wrongdoing, is a popular coffee brand in Vermont. In fact, it is the reason why coffee at Vermont gas stations often tastes reasonably good.

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