United States Attorney
Southern District of New York
May 24, 2011
Former Investment Adviser Sentenced to 26 Months in Prison for Insider Trading Scheme
NEW YORK – Alexei P. Koval, 37, aka “Aleksey Koval,” was sentenced today in Manhattan federal court to 26 months in prison for his participation in an insider trading scheme, announced Preet Bharara, the U.S. Attorney for the Southern District of New York. Koval, a registered investment adviser, traded on inside information he received from his co-conspirator, Igor Poteroba, a former investment banker in the Healthcare Group of UBS Securities LLC. The trading, which was based on information related to six mergers and acquisitions that certain UBS clients were contemplating, generated hundreds of thousands of dollars in illicit profits. Koval previously pleaded guilty to three counts of securities fraud and one count of conspiracy to commit securities fraud on Jan. 7, 2011.
“Alexei Koval flagrantly and repeatedly traded on inside information and was only too happy to share his illicit profits with his partner in crime and tipster. Their scheme has now come to a just conclusion,” said U.S. Attorney Bharara.
According to documents previously filed in Manhattan federal court, from May 2006 through at least 2009, Koval was a registered investment adviser. During approximately the same time period, Poteroba served as an Executive Director at UBS. In that capacity, he obtained material, non-public information regarding certain mergers and acquisitions involving the following six publicly traded healthcare companies: Guilford Pharmaceuticals Inc.; Molecular Devices Corporations; PharmaNet Development Group Inc.; Via Cell Inc.; Millennium Pharmaceuticals Inc.; and Indevus Pharmaceuticals Inc. (collectively, the “healthcare companies”). In violation of his duties of trust and confidence, Poteroba then disclosed the UBS inside information to Koval, who traded on the information, and disclosed it to another co-conspirator.
As part of the scheme, Koval typically received tips from Poteroba by telephone in advance of a public announcement about certain mergers and acquisitions. Shortly after receiving a tip from Poteroba, he and another co-conspirator purchased securities in one of the healthcare companies. Following the public announcement of the acquisition, Koval and the other co-conspirator quickly sold the securities they had purchased. They executed dozens of securities transactions based on UBS inside information provided by Poteroba. Koval then paid a portion of the profits to Poteroba.
In addition to his prison term, Judge Crotty sentenced Koval to two years of supervised release and ordered him to forfeit $1,414,290, representing the amount of proceeds obtained as a result of the securities fraud offenses charged in the indictment.
Koval’s co-conspirator, Igor Poteroba, 37, of Darien, Conn., pleaded guilty to similar charges before Judge Crotty on Dec. 21, 2010, and was sentenced to 22 months in prison on March 21, 2011.
U.S. Attorney Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission for its assistance in the investigation.
This case is being handled by the office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Marissa Molé is in charge of the prosecution.
This case was brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.