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Manhattan U.S. Attorney Charges Former Hedge Fund Manager for Insider Trading Scheme That Made Over $7 Million in Unlawful Profits
PREET BHARARA, the United States Attorney for the
Southern District of New York, and JOSEPH M. DEMAREST, JR., the
Assistant Director-in-Charge of the New York Field Office of the
Federal Bureau of Investigation ("FBI"), announced today the
indictment of JOSEPH CONTORINIS, a former hedge fund portfolio
manager, on charges of conspiracy and securities fraud relating
to $7 million in profits he allegedly made for the hedge fund
through insider trading. CONTORINIS, 45, of New York, New York,
is expected to be arraigned in Manhattan federal court by United
States District Judge RICHARD J. SULLIVAN on November 12, 2009 at
12:30 p.m.
According to the Complaint previously filed in this
case and the Indictment returned in Manhattan federal court late
yesterday afternoon:
From 2004 through June 2006, CONTORINIS, then a
portfolio manager of a hedge fund at an investment advisory firm,
executed securities trades based on material, non-public
information about mergers and acquisitions that CONTORINIS
received from NICOS A. STEPHANOU, who was working as an
investment banker in New York, New York, and London, England.
STEPHANOU and CONTORINIS had a close personal friendship.
CONTORINIS knew that STEPHANOU was tipping him in violation of
STEPHANOU’s duty of confidentiality to his employer and its
clients. For example, from late 2005 through early 2006, STEPHANOU was on the investment banking team representing a
private equity firm that was interested in acquiring Albertson’s
Corporation. During the course of the transaction, STEPHANOU
tipped CONTORINIS about positive and negative developments on the
deal, and CONTORINIS executed trades based on that information.
As a result of this illegal trading, CONTORINIS allegedly made
profits exceeding $7 million for his hedge fund.
During the conspiracy, STEPHANOU also tipped his
friends MICHAEL KOULOUROUDIS and GEORGE PAPARRIZOS about
material, non-public information relating to the mergers and
acquisitions of several public companies.
On April 21, 2009, GEORGE PAPARRIZOS pleaded guilty to
one count of conspiracy to commit securities fraud and one count
of securities fraud. On August 6, 2009, PAPARRIZOS was sentenced
by United States District Judge PAUL A. CROTTY to a term of six
months of home confinement, a $10,000 fine, and forfeiture of
$22,000 in unlawful proceeds.
On May 27, 2009, STEPHANOU pleaded guilty to six counts
of conspiracy to commit securities fraud and one count of
securities fraud before United States District Judge COLLEEN
McMAHON. STEPHANOU awaits sentencing.
On October 15, 2009, a federal grand jury returned a
superseding indictment against MICHAEL KOULOUROUDIS on one count
of conspiracy to commit securities fraud and nine counts of
securities fraud.
Each conspiracy charge carries a maximum sentence of 5
years in prison and a maximum fine of the greater of $250,000, or
twice the gross gain or gross loss from the offense. Each
securities fraud count carries a maximum sentence of 20 years in
prison and a maximum fine of $5 million, or twice the gross gain
or loss from the offense.
Mr. BHARARA praised the work of the FBI in the
investigation of this case. He also thanked the United States
Securities and Exchange Commission for its assistance.
Assistant United States Attorneys ANDREW L. FISH and
REED M. BRODSKY are in charge of the prosecution.
The charges contained in the Indictments are merely
accusations, and the defendants are presumed innocent unless and
until proven guilty.
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