Imagine being caught twice in the act of insider dealing. Charles Rustin Holzer is a Florida investment advisor. Holzer, like a moth attracted to a fire, was unable resist the lure of illicit profits. This led to his demise. We’ll delve into this story which caused quite the stir in the financial world.
Insider Trading is a High-Stakes Game
Imagine having a magic crystal ball which could tell the future of the stock exchange. Right? You could buy low and sell high to make a fortune. Insider trading is exactly what it sounds like – but it’s illegal. Charles Rustin Holzer was a former family office executive and broker who found himself in trouble with the law not just once but twice.
The plot thickens
Picture this: It’s August 2018, just nine days before a significant acquisition announcement by Dun & Bradstreet Corp. (DNB). Holzer is tucked in his Wellington office, Florida, when he hears about this classified information. What’s the catch? A non-disclosure contract prevents him from selling or disclosing the information. Can he resist?
- He purchased 23,000 DNB shares on offshore accounts that were tied to two Cayman Islands entities: Maglione International Ltd.
- Holzer controls these entities and he makes $391,308 of ill-gotten profits.
- These trades correspond to earlier DNB options trading that was the focus of a previous investigation and lawsuit against Holzer.
The Downfall
Imagine that you are playing high stakes poker and your bluff is called. Holzer experienced this on August 4, 2023. The U.S. District Court for the Southern District of New York dealt Holzer a losing card, entering a judgment against him.
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- He will be permanently barred from violating any anti-fraud provision of the Securities Exchange Act.
- The civil penalty is $1,173,926.
- Maglione et Frontenac are also required to pay, with profits of $331 389 and $59 920, respectively.
Awakening Call
Holzer’s story is a powerful reminder of the dangers of insider trade. The SEC’s investigation, which was led by Derek Schoenmann, Elizabeth Baier, Thomas P. Smith, Jr., Celeste Chase, and the New York Regional Office, proved that no-one is above the laws. The SEC extends gratitude to the Financial Industry Regulatory Authority, which assisted in this case.
What’s the moral? You can either play by the rules or you will face the consequences. There’s no place for cheating in the high stakes world of finance.
