The Securities and Exchange Commission today announced fraud charges against Lawrence Billimek, an employee of a major asset management firm with securities portfolios worth billions of dollars, and Alan Williams, who previously worked at several financial industry firms, for perpetrating a multi-year front-running scheme that generated at least $47 million in illegal trading profits.
The SEC’s complaint, filed in federal district court in Manhattan, alleges that, since at least September 2016, Billimek would inform Williams of the asset management firm’s market-moving trades prior to their execution. As the complaint alleges, on the same day, Williams would trade in the same securities prior to Billimek’s employer or while multiple large orders were being placed by the employer. Williams would close his positions after the price of the security moved as expected. This alleged front-running scheme resulted in proceeds of more than $47 million. The SEC staff analyzed trading using the Consolidated Audit Trail (CAT) database to uncover William’s allegedly fraudulent trading and to identify how he profited by repeatedly front-running large trades by Billimek’s employer.
“Billimek allegedly took advantage of his position and abused his employer’s trust by providing Williams with proprietary information that allowed them to gain a trading advantage and pocket tens of millions of dollars in profits,” said Joseph G. Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit. “As today’s action shows, SEC staff will utilize data analytics tools at our disposal to find and charge those who engage in illegal trading of securities.” Front running is not an uncommon practice in the financial and brokerage world, but the SEC does not advance prosecutions in many cases. Clearly stated, it is the practice by market makers of dealing on advance information provided by their brokers and investment analysts, before their clients have been given the information. Generally, it would take an insider/whicstleblower to reveal the wrongdoing and establish by corroboration of some sort that it is happening.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Billimek and Williams.
The SEC’s complaint charges Billimek and Williams with violating the antifraud provisions of the federal securities laws and seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief.
The SEC’s investigation was conducted by Market Abuse Unit members David Bennett, John Rymas, Jeffrey Oraker, and Frank Goldman with assistance from Darren Boerner and John Marino of the Market Abuse Unit’s Analysis and Detection Center and Judy Tran, Donald Hong, and Frank A. Brown II of the SEC’s Division of Economic and Risk Analysis. The case was supervised by Danielle Voorhees and Mr. Sansone. The SEC’s litigation will be led by Terry Miller of the SEC’s Denver Regional Office. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.
Jeffrey Newman is a whistleblower lawyer with the firm Newman & Shapiro and he can be reached at
firstname.lastname@example.org or at 978-880-4758