Idaho IT Professional Pleads Guilty to Misusing Pre-Publication Investment Recommendations for Insider Trading Scheme | USAO-SDNY

Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, Assistant Director of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that DAVID STONE pleaded guilty to one count of securities fraud in connection with an insider trading scheme. STON was arrested in May of this year and pleaded guilty this morning before US District Judge Mary Kay Vyskocil.

U.S. Attorney Damian Williams said: “David Stone admitted in court today that he illegally accessed pre-publication stock options from an investment advisory service so he could beat the markets and generate millions in trading profits for himself . Today’s appeal reflects this Office’s commitment to ensuring the integrity and fairness of our markets. David Stone now awaits sentencing for his crime and must also forfeit his ill-gotten gains and make restitution.”

According to the allegations in the Information and statements made in public court proceedings:

From 2020 until at least March 2022, DAVID STONE took advantage of market-moving stock recommendations made by an investment recommendation service (“Advisor-1”) before those recommendations were made public to paying subscribers. STONE, an IT professional, accessed Advisor-1’s computer system using unauthorized login credentials and used his improperly obtained access to view information about Advisor-1’s recommendations before they were announced to Advisor’s paying subscribers -1.

Advisor-1 stock recommendations usually, but not always, result in higher closing prices for the recommended stock compared to the previous day’s closing price. By trading these recommendations before they were announced, STONE was able to achieve significant profits unavailable to other market participants. In fact, across all the brokerage accounts he traded in, STONE made at least $3.5 million in profits.

In addition to his own trading, STONE provided trading advice to at least one other individual (“Tipee-1”). Between or about January 2021 through or about March 2022, on approximately 45 separate days, STONE sent emails to Tipee-1 providing stock names and/or ticker symbols prior to Advisor-1’s announcements of recommendations shares to paying subscribers. A brokerage account associated with Tipee-1 traded ahead of Advisor-1’s recommendations on more than a dozen occasions. As a result of this negotiation, Tipee-1 earned more than about 2.7 million dollars.

Before advising Tipee-1, STONE outlined the terms under which STONE would provide information to Tipee-1, including the steps they would take to conceal their plan. Among other things, STONE acknowledged that “what we are doing could be considered insider trading” and therefore, advised Tipee-1 “[d]o other transactions than what I tell you,” explaining, “[i]If all your trades are 5x up and you never make a loss [sic] may attract the attention of regulatory authorities’.

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David Stone, 37, of Nampa, Idaho, pleaded guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison.

The maximum possible sentence in this case is set by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. STONE is scheduled to be sentenced by Judge Vyskocil on February 14, 2023 at 2:00 p.m.

Mr. Williams praised the outstanding work of the FBI. Mr. Williams thanked the US Securities and Exchange Commission, which has brought a parallel civil action.

This case is being handled by the Office’s Capital and Commodity Fraud Task Force. Assistant United States Attorneys Samuel P. Rothschild and Andrew Thomas are leading the prosecution.

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