California Man Sentenced to 18 Months in Prison for Role in Three-Year, Cross-Country Insider Trading Scheme that Netted More Than $3.9 Million
TRENTON, N.J. – A day trader from Oak Park, California, was sentenced today to 18 months in prison for his role in a multi-year insider trading scheme that made over $3.9 million in illicit profits by exploiting material information in violation of confidentiality agreements, U.S. Attorney Craig Carpenito announced.
Ronald Chernin, 70, of Oak Park, California, previously pleaded guilty before U.S. District Judge Michael A. Shipp to an information charging him with one count of conspiracy to commit securities fraud and one count of securities fraud. Judge Shipp imposed the sentence today in Trenton federal court
According to documents filed in this case and statements made in court:
Chernin and co-defendant Steven Costantin, 58, of Farmingdale, New Jersey, worked as day traders for Costantin’s brother-in-law, Steven Fishoff, 62, of Westlake Village, California. Between May 2010 and August 2013, Chernin, Costantin, and Fishoff, as well as a business associate referred to as “Trader A,” expressed interest in participating in numerous stock offerings by publicly traded companies.
Chernin, Costantin, and other members of the day trading operation falsely characterized their trading entities as legitimate, full-service financial management firms with as much as $150 million in assets under management, in order to increase the likelihood that the investment bankers would solicit them to participate in the stock offerings.
Before providing confidential information concerning the companies or the terms of the proposed sales, the investment bankers first required that Chernin, Costantin, Fishoff, Trader A, and their associated trading entities, enter into confidentiality, or “wall-crossing,” agreements, whereby they agreed not to disclose or trade on the inside information and were brought “over the wall” for the narrow purpose of determining whether to purchase the offered securities.
Instead, Chernin, Costantin, and Fishoff violated the confidentiality agreements by directly or indirectly tipping each other and others with the inside information concerning the stock offerings; short selling the issuers’ stock in anticipation of a drop in price when the stock offerings were disclosed to the public; and covering their short positions once the stock offerings were disclosed. Additionally, Fishoff tipped his friend, Paul Petrello, 57, of Boca Raton, Florida, and another conspirator, Joseph Spera.
By trading on the nonpublic information, Chernin, Costantin, and their conspirators gained more than $3.9 million in illicit profits over the course of the three-year scheme. Chernin and Costantin shared 50 percent of their profits with Fishoff.
In addition to the prison term, Judge Shipp sentenced Chernin to three years of supervised release and fined him $2,000.
Costantin previously pleaded guilty to his role in the scheme and was sentenced to one year in prison. Petrello previously pleaded guilty to his role in the scheme and was sentenced to three years of probation. Fishoff pleaded guilty to his role in the scheme and was sentenced to 30 months in prison. Spera pleaded guilty to his role in the scheme and was sentenced to one year of probation.
U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark, with the investigation leading to today’s sentencing. He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office, under the direction of Marc Berger.
The government is represented by Nicholas P. Grippo, Attorney in Charge of the U.S. Attorney’s Trenton Office; Sarah Devlin, Chief of the Office’s Asset Recovery and Money Laundering Unit (ARMLU), and Senior Trial Counsel Barbara Ward of the ARMLU.
