N.J. U.S. Attorney: Former Partner at Broker-Dealer Firm Charged With $3.4M Insider Trading Scheme

NEWARK, New Jersey, March 31 -- The U.S. Attorney for the District of New Jersey, Philip R. Sellinger, issued the following news release on March 30, 2023:

A former partner at a New Jersey broker-dealer firm was arrested today and charged with engaging in an insider trading scheme that netted millions of dollars in illegal trading profits, U.S. Attorney Philip R. Sellinger announced today.

Christopher Matthaei, 44, of Brielle, New Jersey, is charged by complaint with one count of securities fraud conspiracy and one count of securities fraud. He appeared today before U.S. Magistrate Judge Cathy L. Waldor in Newark federal court and was released on $250,000 unsecured bond.

"As alleged, Christopher Matthaei illegally exploited his relationship with a close friend to gain access to confidential information about yet-to-be-announced mergers and acquisitions involving special purpose acquisition companies, or SPACs," U.S. Attorney Sellinger said. Matthaei is alleged to have made trades on seven SPACs that netted him $3.4 million in illegal profits. SPACs may have been a hot trend on Wall Street, but the District of New Jersey will continue to be relentless in bringing inside traders to justice, no matter the market trends."

"Federal laws targeting insider trading are designed to protect the general public from those who attempt to cash in on private information," FBI Newark Special Agent in Charge James E. Dennehy said. "We allege Matthaei used his knowledge to make more than $3 million, disregarding the rules and policies everyone is required to follow. His position doesn't give him, or anyone else, the power to break the law."

According to the complaint and statements made in court:

Matthaei was a partner and senior salesperson at a Charlotte, North Carolina-based broker-dealer with offices in Red Bank, New Jersey. From May 2020 through February 2021, Matthaei illegally traded on material, non-public information, or MNPI, that he received from a conspirator, a friend who worked at a large Canadian asset management firm. The MNPI pertained to SPACs that were engaged in confidential merger negotiations and shared information with the asset management firm as a potential investor in the SPAC deals. The conspirator received this MNPI every time a SPAC was placed on his firm's confidential restricted list, meaning that the firm's employees were prohibited from buying or selling the SPACs' securities, either personally or via another person or third party. Despite knowing about these trading restrictions, the conspirator shared the MNPI with Matthaei, who then purchased securities in the SPACs using his personal brokerage accounts. In June 2020, Matthaei paid for a private plane and extended trip with the co-coconspirator and their families to a luxury resort on the island of St. Barth, where they continued to engage in the insider trading scheme.

Matthaei made more than $3.4 million in illegal trading profits from the insider trading scheme.

The securities fraud count carries a maximum penalty of 20 years in prison and a $5 million fine, and the securities fraud conspiracy count carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross amount of gain or loss from the offense, whichever is greatest.

The U.S. Securities and Exchange Commission also filed a civil complaint against Matthaei today based on the same conduct.

U.S. Attorney Sellinger credited special agents of the FBI, under the direction of Special Agent in Charge James E. Dennehy in Newark, with the investigation leading to today's arrest.

The government is represented by Assistant U.S. Attorneys Jennifer Kozar and Marko Pesce of the U.S. Attorney's Office Economic Crimes Unit in Newark.

The charges and allegations contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

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Original text here: https://www.justice.gov/usao-nj/pr/former-partner-broker-dealer-firm-charged-34-million-insider-trading-scheme