“WASHINGTON (Reuters) – U.S. securities regulators charged a Wells Fargo investment banker and nine others with fraud on Wednesday in connection with their alleged role in an insider-trading ring that earned more than $11 million by trading on tips about impending mergers.
The Securities and Exchange Commission said that John Femenia, 30, misused his position at a unit of Wells Fargo to obtain material, non-public information about four different mergers involving clients.
The SEC said Femenia then tipped his friend, Shawn Hegedus, a registered broker-dealer. The SEC says the two then tipped other friends, resulting in a “massive, serial insider-trading ring” that spread across five states.
The SEC said it has already obtained a court order to freeze the defendants’ assets.
“Here you have an investment banker who clearly knew better that inside information can’t form the basis of trading decisions,” said William Hicks, associate director for enforcement in the SEC’s Atlanta Regional Office.
“Instead, he basically started a phone tree of nonpublic information to enrich friends and others.”
According to the SEC’s complaint, filed in the U.S. District Court for the Western District of North Carolina, Femenia is still employed in the Wells Fargo New York office with the Industrials Investment Banking Group. Previously, he worked in the North Carolina office.”
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