Court Enters Final Judgments Against Zachary Zwerko and David Post
The Securities and Exchange Commission (SEC) announced that on March 1, 2016, the Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York entered final judgments on consent against defendants Zachary Zwerko and David Post. The final judgment entered against Zwerko imposes a permanent injunction against future violations of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and orders that Zwerko’s obligation to pay disgorgement of $57,000 be offset by the criminal forfeiture judgment imposed against him. The final judgment against Post imposes a permanent injunction against future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and orders that Post’s obligation to pay disgorgement of $683,967 be offset by the criminal forfeiture judgment imposed against him.
In its Amended Complaint filed on October 24, 2014, the SEC alleged that Zwerko and Post orchestrated an insider trading scheme that generated over $683,000 by purchasing securities in Post’s trading accounts based upon confidential information Zwerko tipped about his employer’s pharmaceutical acquisition targets. According to the Amended Complaint, Post and his friend, Zachary Zwerko, used prepaid “burner” cell phones to exchange coded text messages in advance of Post’s trading. They also used a dummy e-mail account they could both access to draft an e-mail message in code and leave it in the draft folder for the other to read and then delete. In exchange for the illegal tips, Post paid Zwerko $7,000 at a Halloween party following his profitable trading in 2012, and, additionally, gave Zwerko $50,000 in a shoebox when Zwerko visited Post’s home after additional insider trading by Post in mid-2014.
The U.S. Attorney’s Office for the Southern District of New York announced parallel criminal insider trading cases against Zwerko and Post in October 2014, and subsequently both defendants pled guilty. Zwerko was sentenced to 37 months’ imprisonment followed by three years of post-release supervision, ordered to forfeit $644,314 in illegal trading profits, and ordered to pay a $50,000 fine. Post was sentenced to 6 months’ imprisonment followed by two years of post-release supervision, ordered to forfeit $737,628 in illegal trading profits, and ordered to pay a $50,000 criminal fine.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.