New York (HedgeCo.Net) – Another New York hedgie has gotten himself in trouble with the SEC after he used nonpublic information about a clothing company to give the hedge fund where he worked a $3.2 million trading edge.
The SEC is charging Mark Megalli with insider trading, alleging that he obtained the inside information through a consulting agreement he had with Eric Martin, the former vice president of investor relations at youth clothing store Carter’s. The SEC has previously charged Martin among several others in its investigation into insider trading of Carter’s stock.
Martin, who had left Carter’s and started his own consulting firm, maintained contact with at least one company insider and obtained confidential information in advance of market-moving events that he supplied to Megalli so he could trade on it. Megalli enabled hedge fund Level Global Investors L.P. to avoid approximately $2.4 million in losses and make $853,655 in illicit profits by trading shares ahead of positive or negative news.
“The information was hot enough that Megalli sometimes conducted the trades while he was still on the phone with his source,” said William Hicks, associate regional director of the SEC’s Atlanta Regional Office. “After one profitable trade, Megalli bragged to his colleagues about being ‘max short’ in advance of negative news without mentioning his inside source.”
The SEC agreed not to prosecute Carter’s in return for the company’s extensive cooperation with the SEC’s investigation.
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