MALNIK was extradited from Switzerland and pled guilty on June 25, 2021, to insider trading for his role in trading based on confidential inside information stolen by an insider at a global investment bank and shared with MALNIK in exchange for profits. The sentence was imposed on November 19, 2021, by United States District Judge Victor Marrero.
U.S. Attorney Damian Williams said: "This prosecution shows that we will vigorously protect the integrity of our nation's capital markets by holding insider traders accountable for their use of inside information, regardless of where in the world the inside information is stolen and where tips are illegally passed."
According to the Superseding Indictment, statements made in open court, and court filings:
DOV MALNIK and his business partner and codefendant Tomer Feingold, both Israeli citizens, were securities traders who traded in their own names and managed various companies and investment funds. From at least 2013 through 2017, MALNIK participated in a large-scale, international insider trading ring.
Through the scheme, MALNIK received material, nonpublic information ("MNPI") concerning acquisitions and potential acquisitions of publicly traded companies from a securities trader who resided in Switzerland ("CC-1"). MALNIK knew that this MNPI was obtained by CC-1 directly and indirectly from individuals who were insiders at publicly traded companies and investment banks.
These insiders breached their fiduciary duties and shared MNPI with others, including CC-1, in exchange for compensation, who in turn shared that information with MALNIK. MALNIK used that information to place timely, profitable securities trades resulting in millions of dollars of profits.
Throughout the conspiracy, MALNIK, Feingold, the investment bank insiders, CC-1, and others involved in this scheme, took numerous steps to conceal their unlawful enterprise, including through the use of encrypted messaging applications and multiple unregistered "burner" cellphones to communicate with each other.
MALNIK also attempted to avoid detection by engaging in securities trading through numerous offshore corporate entities. For example, in 2011, MALNIK incorporated a British Virgin Islands entity based in Geneva, Switzerland, and subsequently opened trading and/or bank accounts in that shell company's name. During the insider trading scheme, MALNIK's offshore companies traded in the stocks of companies about which MALNIK had received MNPI -- often with multiple of those companies trading in the same stock and on the same days.
MALNIK also used these entities to transfer a portion of the profits of his and Feingold's illegal insider trading to CC-1, as per MALNIK's agreement with CC-1. At first, MALNIK instructed his bank to send the funds to an account at a financial institution in Switzerland that agreed to hold the funds for the benefit of CC-1. After a short time, however, MALNIK's bank questioned the purpose of the transactions and requested justification for the transfer of funds.
Accordingly, in order to deceive the banks, MALNIK, Feingold, and CC-1 agreed that CC-1 would issue fake invoices for consulting services to MALNIK and Feingold's various offshore entities. The offshore entities would then send the funds to CC-1's account pursuant to the fake invoices.
To date, this investigation has also resulted in the conviction of other individuals who were involved in this global insider trading scheme, including investment banker Bryan Cohen, who pled guilty on January 7, 2020, to illegally passing MNPI related to his bank's corporate clients, and entrepreneur and pharmaceutical company executive Telemaque Lavidas, who was convicted on January 15, 2020, of illegally passing MNPI related to Ariad Pharmaceuticals, Inc.
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In addition to the prison term, MALNIK, 43, was ordered to pay a fine of $50,000 and forfeiture of $1,594,779.
Mr. Williams praised the work of the Federal Bureau of Investigation and also thanked the Securities and Exchange Commission.
This case is being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Richard Cooper and Daniel Tracer are in charge of the prosecution.