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SEC target Petrello pleads guilty to shorting scheme

2016-02-23 10:44 ET - Street Wire

Also Street Wire (U-*SEC) U S Securities and Exchange Commission
Also Street Wire (C-AEZ) Aeterna Zentaris Inc (3)
Also Street Wire (C-SLR) Solitario Exploration & Royalty Corp

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by Mike Caswell

Paul Petrello, a Florida man charged in connection with an insider trading scheme that involved stealing confidential information from investment banks, has pleaded guilty. He entered the plea in an appearance on Friday, Feb. 19, before a judge in New Jersey. The judge set his sentencing for May 25, 2016.

The government claimed that Mr. Petrello and others shorted 13 companies, including a pair of Toronto Stock Exchange listings, after learning about undermarket offerings ahead of time. His associates posed as managers of large investment funds, obtaining advance information about those offerings. The men then used the information to generate $3.9-million in gains, prosecutors said. The government attributed $1.2-million of those gains to Mr. Petrello. (All figures are in U.S. dollars.)

The charges that Mr. Petrello pleaded guilty to were one count of conspiracy to commit securities fraud and one count of securities fraud. He faces a maximum of 20 years in jail and a $5-million fine. His plea agreement specifies that he will receive credit for pleading guilty early and for accepting responsibility for his crimes. With those adjustments, and assuming he has no prior criminal record, sentencing guidelines suggest a jail term of three to four years. He will also likely have to pay a civil fine to the U.S. Securities and Exchange Commission, with a judge to determine that sanction. As part of his plea agreement, he has agreed to forfeit various accounts that the government seized upon his arrest.

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