Insider trading cases are hitting Goldman Sachs where it hurts most — its reputation
The arrest of Bryan Cohen on Friday is the third scandal in 18 months for the bank, which cannot afford to be seen as anything but ethically above reproach
New York — Goldman Sachs has built itself into a global deal making force whose bankers are often stitching together the biggest and most sensitive corporate transactions.
But a trio of charges in just the last 18 months has threatened to tarnish that standing.
Bryan Cohen, a Goldman investment banker in New York, was arrested Friday over allegations of insider trading, court records show. It comes just months after another banker was sentenced to three months in prison for sharing illicit deal tips. And a third pleaded guilty last year to leaking information to a National Football League linebacker in exchange for tickets to games.
Such accusations strike at the sanctity of the business where corporate titans seek out the advice of large investment banks to navigate discussions over deals that can move billion of dollars in market prices. The allegations highlight the struggles of even top-tier banks in trying to successfully clamp down on such misconduct. For Goldman, the cases against these junior bankers each seem to have been carried out independent of each other.
Cohen, a vice-president, leaked non-public information for almost three years in exchange for cash as part of an international insider-trading scheme that led to $2.6m in illicit gains, according to a separate complaint from the US Securities and Exchange Commission (SEC) that did not identify his employer.
Some information was tied to pending deals involving Syngenta and Buffalo Wild Wings, the documents show.
A Goldman spokesperson confirmed Cohen was an investment banker who worked in the consumer retail division. The bank was unaware of the allegations until Cohen was arrested on Friday morning at his apartment in Manhattan. He has since been placed on leave.
“We are co-operating with the authorities on the situation regarding Mr Cohen,” Nicole Sharp, a representative for the firm, said in an e-mailed statement. “Protecting client confidential information is our highest internal priority and we condemn this alleged behaviour.”
Cohen appeared before US magistrate judge Stewart Aaron on Friday and was released on a $250,000 bond pending a conference scheduled for Tuesday. Patrick Smith, an attorney representing Cohen, declined to comment.
Cohen, 33, shared the information with a trader who has not been identified and who subsequently passed it on to George Nikas, who realised the gains, according to the SEC complaint.
Nikas, a 54-year-old New York restaurateur who owns the chain GRK Fresh, was also charged by prosecutors. Cohen expected and received an unspecified amount of cash in exchange for the tips he provided, the filings show.
Cohen has been with Goldman for almost 10 years, starting in the London office before being transferred to New York in 2017. The insider tips were shared between April 2015 and November 2017, according to the SEC complaint.
The complaint offers a detailed view of how the alleged scheme unfolded. For example, shortly after Cohen moved to New York, Buffalo Wild Wings contacted Goldman to help as the Minneapolis-based casual dining chain was approached by Arby’s Restaurant Group.
Cohen was made aware of the potential acquisition the same day, October 17 2017. Nikas purchased 22,000 Buffalo Wild Wings shares between October 20 and October 27 for $2.5m, selling 9,000 of them by November 1 for an initial profit of $79,074.
After the market close on November 13, news broke of a potential Buffalo Wild Wings acquisition. The next day, the restaurant chain’s stock price rose 24%, and Nikas sold his remaining shares for a profit of $343,298, according to the complaint.
Nikas was indicted on October 7 along with a friend, Telemaque Lavidas, on charges they conspired to steal material non-public information about Ariad Pharmaceuticals from Lavidas’s father, who served on the company’s board until 2016, according to court documents unsealed on Friday.
Takeda Pharmaceutical agreed to buy Ariad, a maker of cancer drugs, for $4.66bn in 2017.
Nikas was also accused of participating in a “large-scale, international insider trading ring” from 2012 to 2017, during which he received information about acquisitions and potential acquisitions of publicly traded companies from an unidentified securities trader in Switzerland, according to the indictment.
Nikas did not immediately respond to a message seeking comment.
Lavidas was arraigned on Friday before US district judge Denise Cote and held without bail pending trial due to a potential risk of flight, according to court records. His attorney, Jennifer Achilles, did not immediately respond to an e-mail seeking comment.
Cohen was arrested at 6am on Friday and appeared in court later that afternoon. He was released after surrendering his passport, along with some helpful advice from the judge: “Refrain from conduct alleged in charging document.”
With Chris Dolmetsch.