Two Charged With Insider Trading Tied To Penn Deal For Score

The Securities and Exchange Commission (SEC) recently announced that two men are being charged with insider trading after making profitable trades with nonpublic information. One of the trades involved the security of Penn Entertainment (NASDAQ: PENN).

31, 2020 merger of London-based gaming company Entain PLC and MGM Resorts International.

The SEC recently charged Steven Teixeira, the chief compliance officer at an international payment processing firm, and Jordan Meadow, a registered investment representative at New York-based broker-dealer Spartan Capital Securities, with insider trading related to a gaming industry merger. According to legal documents unsealed in a Manhattan federal court, Teixeira allegedly obtained the information from his girlfriend’s computer while she was working from home during the early stages of the coronavirus pandemic. She is thought to have formerly worked at Morgan Stanley, where she was privy to mergers and acquisitions transactions before they were publicly announced. It is believed one of those transactions was the Aug. 31, 2020 merger of London-based gaming company Entain PLC and MGM Resorts International. (Image: SEC)

On May 5, 2021, Penn Entertainment (NASDAQ: PENN), then Penn National Gaming, announced their plan to acquire Score Media and Gaming at a cost of $2 billion in cash and stock. This acquisition was aimed at increasing their presence in Canada. Here’s how it happened:

How the Scheme Went Down

The SEC alleges that prior to the official announcements, Meadow and Teixeira profited from several deals, including Penn’s takeover of Score Media. According to the commission, Teixeira used a friend to get information from his girlfriend’s laptop which he used to purchase call options on several issuers. He then allegedly informed his friends, including Meadow, so that they could also trade in the stocks. Teixeira made a total of $28,600 from this “scheme”. Meadow, however, made a tremendous profit of over $730,000. It is alleged that Meadow also advised his clients to invest in call options, helping them generate big profits while he made commissions.

According to Bloomberg, Meadow reportedly purchased more than 770 “call options”, likely on Score Media, before Penn announced their acquisition of the Canadian firm. By doing so, Meadow’s clients were able to generate profits of over $5 million, since “call options” are options contracts that traders buy in anticipation that the underlying asset will increase in value. As expected, Score Media stocks rose when the news was exposed. However, Meadow now has to face civil and criminal charges.

Defendants Facing Civil, Criminal Charges

The Supreme Court of the United States Attorney’s Office for the Southern District of New York has filed criminal charges against Meadow and Teixeira. Teixeira has pleaded guilty to 12 counts, which include securities fraud, in cooperation with the government. The U.S. District Court for the Southern District of New York, on behalf of the SEC, has accused Teixeira, of New York, and Meadow, of New Jersey, of violating the anti-fraud rules of the federal securities laws. The SEC is seeking permanent injunctive relief, reparation with prejudgment interest, financial penalties, and bars on Meadow and Teixeira taking on the positions of officers or directors of publicly traded firms, according to the statement. The SEC is taking a stricter attitude towards those accused of insider trading. At the conclusion of June, the commission charged a one-time Pfizer (NYSE: PFE) worker with insider trading just before a COVID-19 vaccine statement was made.

The SPAC being used to make former President Trump’s Truth Social social media company public was also faced with levying charges against several of its staffers.