The U.S. Department of Justice announced four arrests in an insider trading scheme based on confidential information obtained from the Centers for Medicare & Medicaid Services (CMS).
In an announcement, the U.S. Attorney’s Office of the Southern District of New York revealed charges against David Blaszczak, a political intelligence consultant; Christopher Worral, a CMS employee; and Theodore Huber and Robert Olan, who worked for a New York-based hedge fund focused on healthcare.
Jordan Fogel, a former partner and analyst in the hedge fund, has already pled guilty and is cooperating with the government.
The department details an alleged scheme in which Worrall passed material nonpublic information to Blaszczak, who then fed the information to hedge fund employees so that they could trade ahead of market-moving events. The announcement alleges Huber, Olan and Fogel recommended trades generating over $3.5 million in profits based upon this information.
The agency also brought separate charges against Blaszczak, alleging he passed confidential information about cuts in CMS reimbursement rates to a second healthcare-oriented hedge fund, whose portfolio manager, Christopher Plaford, previously pled guilty to using the information to make profitable trades. Plaford is now reportedly cooperating with the government as well.
Charges include conspiracy to convert property of the United States, securities and wire fraud, and conversion of property of the United States. The Securities and Exchange Commission also separately filed civil charges against Blasczak, Worrall, Huber and Fogel, per the announcement.
Lawyers for Olan and Huber maintained their clients’ innocence, according to a Reuters report. The news agency received no comment from representatives for Worral or Blaszczak.
“Just like trading on material nonpublic corporate information can be a federal crime, so can trading based on secret government information, as alleged to have happened here,” said Acting U.S. Attorney Joon H. Kim in a statement.
William F. Sweeney, Jr., assistant director-in-charge of the FBI added, “When individuals outside an organization receive information they know they shouldn’t have, they too have an obligation not to use this to their personal advantage.”