D.C. U.S. Attorney: Visiting Brazilian Attorney Pleads Guilty to Insider Trading

WASHINGTON, Nov. 1 -- The U.S. Attorney for the District of Columbia, Matthew M. Graves, issued the following news release:

A Brazilian national, previously working in the U.S. as a visiting international attorney, pleaded guilty today in U.S. District Court in the District of Columbia to a charge of insider trading charges for trading based on material, nonpublic information, announced U.S. Attorney Matthew M. Graves and Special Agent in Charge Wayne A. Jacobs, of the FBI Washington Field Office's Criminal and Cyber Division.

Romero Cabral Da Costa Neto (Costa), 33, of Rio de Janeiro, had been residing and working as a visiting attorney in Washington D.C., on a one-year J-1 Visa, at a global U.S. law firm (the Law Firm). Costa was arrested on Aug. 22, 2023, by agents with the FBI's Washington Field Office.

"This attorney stole material non-public information, betrayed his law firm, victimized its client companies, and monetized those insider secrets to gain an illegal advantage on other investors," said U.S. Attorney Graves. "The FBI and the Department of Justice will move quickly to arrest and prosecute those who game the system to enrich themselves while, in the process, undermining the investing public's confidence in the securities markets."

Costa pleaded before U.S. District Judge Carl J. Nichols, who scheduled sentencing for Dec. 20, 2023

According to court documents, Costa began working in the U.S. for the Law Firm in September 2022. Until the FBI arrested him in August, Costa executed multiple stock trades in companies represented by the Law Firm. As confirmed by the Law Firm records, Costa accessed internal Law Firm files in advance of public market-moving announcement.

According to the plea agreement, one of these trades involved Company B, a Seattle-based biotech company represented by the Law Firm. In or around April of 2023, Company C, a Swedish international biopharmaceutical company, began negotiations to acquire Company B. Both Company B and C were public companies. Company B's Board of Directors held several meetings throughout April and into early May discussing transaction prices and terms of the sale. Representatives of the Law Firm attended these meetings and prepared documents relating to these meetings.

In early May 2023, Company B, whose stock was trading at around $4.80, informed Company C that they would sell to Company C for a price above $9.00 per share. On May 9, 2023, Company C relayed an offer to buy all outstanding common stock in Company B for $9.10 per share. The stock was trading at $4.82 on May 9, 2023. The Board of Directors approved the sale at $9.10 and both Company B and C announced the $1.7 billion transaction in the early morning hours of May 10, 2023. Trading in Company B opened at $8.91 per share on May 10, 2023.

According to public documents, Costa used two online trading firms to purchase 10,400 shares in Company B on May 9, 2023, for $49,976. Costa then sold his holdings in Company B on May 10, 2023, for $92,635.24, resulting in a one-day investment profit of $42,649.13.

According to the complaint, Costa improperly accessed Law Firm files related to Company B in the lead up to this merger. Costa was not assigned to this transaction and had no legitimate reason to access and view these files related to this matter. Costa accessed files over 100 times in advance of the sale.

The complaint further alleged that on June 2, 2023, Costa purchased stock in Company E - another company that was represented by the Law Firm - one day before Company E went public with information about drug treatment for patients with a specific cancer. The stock rose following the announcement. Costa sold his position on June 5, 2023.

On June 6, 2023, the Law Firm issued an opinion related to a secondary stock offering on behalf of Company E. The opinion had the effect of driving down the value of the stock. Costa was able to purchase shares of Company E immediately before a positive market event and then quickly sell before the subsequent negative market event, profiting by approximately $1,000 from these transactions. According to the complaint, Costa improperly accessed Law Firm files related to this matter in the lead up to the announcements. Costa was not assigned to this matter and had no legitimate reason for accessing these files.

In another instance, Costa allegedly improperly accessed Law Firm documents and files related to Company F, another firm client. On June 15, 2023, Company F and Company G announced a merger in an all-stock deal to create a $5.4 billion oilfield services firm. Between June 8, 2023, and June 12, 2023, Costa purchased approximately 7,000 shares of Company G in advance of this merger announcement. He subsequently sold the shares and profited approximately $8,500 from the transactions. Costa was not assigned to this matter and had no legitimate reason to access these files.

Insider trading carries a statutory maximum penalty of 20 years in prison. The charge also carries potential financial penalties. The maximum statutory sentence for federal offenses is prescribed by Congress and is provided here for informational purposes. The sentencing will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

Costa also faces additional charges of securities violations in a parallel civil complaint filed by the U.S. Securities and Exchange Commission's Philadelphia Regional Office.

The SEC's complaint, filed in U.S. District Court for the District of Columbia, charges Costa with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties.

The SEC case originated from the SEC's Market Abuse Unit's Analysis and Detection Center, which uses data analysis tools to detect suspicious trading patterns. The SEC referred the matter to the U.S. Attorney's Office for the District of Columbia.

This case is being investigated by the FBI's Washington Field Office. It is being prosecuted by Assistant U.S. Attorney Kevin Rosenberg, of the U.S. Attorney's Office for the District of Columbia.

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Original text here: https://www.justice.gov/usao-dc/pr/visiting-brazilian-attorney-pleads-guilty-insider-trading