SEC Charges Sean Wygovsky and Christopher Matthaei in Multi-Million Dollar SPAC Insider Trading Scheme
On March 30, 2023, the Securities and Exchange Commission (the “SEC“) filed insider trading charges against Sean Wygovsky, a former trader at a Canadian asset management firm, and Christopher Matthaei, a former partner at a U.S. broker-dealer, for using nonpublic information in advance of at least seven merger announcements involving Special Purpose Acquisition Companies (SPACs) to earn illicit profits of more than $3.4 million.
The SEC’s complaint alleges that Wygovsky learned material non-public information about upcoming SPAC mergers from his employer’s involvement in transactions related to the mergers. The complaint further alleges that, from May 2020 through April 2021, Wygovsky used encrypted messaging through Telegram to tip his close friend and trading client, Matthaei, about the upcoming mergers. According to the complaint, Matthaei, who ran a trading and research group focused on SPACs during the relevant period, allegedly traded on Wygovsky’s tips.
According to the SEC’s complaint, SPAC mergers that Wygovsky tipped off Matthaei about included (i) a PIPE offering for a merger between the SPAC Tortoise Acquisition Corp. and Hyliion Inc. (“Hyliion”), a manufacturer of electric powertrains for commercial vehicles, (ii) a PIPE offering for a merger between the SPAC Healthcare Merger Corp. and SOC Telemed, a telemedicine technology provider, (iii) a PIPE offering for a merger between the SPAC dMY Technology Group, Inc. and Rush Street Interactive, LP (“Rush Street”), an online casino and sports betting company, (iv) a PIPE offering for a merger between the SPAC Software Acquisition Group Inc. II and Otonomo Technologies Ltd. (“Otonomo”), an automotive software and data services provider., (v) a PIPE offering for a merger between the SPAC Fusion Acquisition Corp. and the financial technology company MoneyLion Inc. (“MoneyLion”), (vi) a PIPE offering for a merger between the SPAC Atlas Crest Investment Corp. and Archer Aviation Inc. (“Archer Aviation”), a manufacturer of electric vertical takeoff and landing aircraft, and (vii) a PIPE offering for a merger between the SPAC Artius Acquisition Inc. and Origin Materials Inc. (“Origin Materials”), a manufacturer of sustainable, “carbon negative” materials.
Hyliion, Rush Street, MoneyLion and Archer Aviation completed their mergers and now trade on the NYSE.
Otonmo and Origin Materials completed their mergers and now trade on the NASDAQ.
SOC Telemed completed its merger but has since been taken back private.
The SEC’s complaint, filed in the United States District Court for the District of New Jersey, charges Wygovsky and Matthaei with violating the antifraud provisions of the federal securities laws and seeks permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against Matthaei and Wygovsky, and an officer and director bar against Matthaei. Wygovsky has consented to a bifurcated settlement, subject to court approval, under which he will be permanently enjoined from violating the federal securities laws.
The SEC previously charged Wygovsky with perpetrating a lucrative front running scheme, and Wygovsky consented to a bifurcated settlement in that matter as well.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey announced criminal charges against Matthaei. In the criminal case, Matthaei is charged with one count of securities fraud conspiracy and one count of securities fraud. 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.
To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected]. 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.
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Brenda Hamilton, Securities Attorney
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