The insider trading case involving San Francisco resident Toby Scammell ended Monday when he pleaded guilty to a single securities fraud count at a hearing in Los Angeles federal court, the FBI announced.
Scammell was accused of making more than $192,000 by trading on insider information gleaned from his then-girlfriend about Walt Disney Company’s impending acquisition of Marvel Entertainment. The woman was working as an extern in Disney’s corporate strategy department when the information changed hands.
Scammell’s guilty plea in the criminal case comes in the wake of his agreement last month to pay just over $800,000 to settle a parallel civil suit filed against him by the U.S. Securities and Exchange Commission in August 2011.
According to the SEC complaint [ PDF], between August 13, 2009, and August 28, 2009, the then-24-year-old Scammell bought $5,456 worth of “highly speculative and risky” call options of Marvel that were due to expire within a few weeks. Some of the options had strike prices of as much as $50, which was unusual given that Marvel stock price had never closed above $41.74.
When Disney announced on August 31, 2009, that it planned to acquire Marvel, the target company’s shares closed at $48.37 apiece—25 percent above the stock’s closing price of $38.65 the previous Friday. Scammell then sold all of his option contracts, turning a profit of more than 3,000 percent.
According to Compliance Week, after the SEC initiated a case against him, Scammell launched a website called SECFAIL.com, which he used to criticize the commission and its investigation process. His complaints included a claim that the agency had no evidence that he had gained access to nonpublic information. The SEC, he maintained, was “making an illogical leap and assuming that I knew what my girlfriend knew.” Scammell went on to say that if that were the basis for determining access to insider information, then “well-networked investors everywhere should be sued and embarrassed in the press, not for receiving information but merely for their relationships,” according to Compliance Week.
Those protests notwithstanding, Scammell admitted in court as part of his plea agreement that he had indeed learned of Disney’s intentions to buy Marvel from his then-girlfriend.
Scammell is due to be sentenced by U.S. District Court Judge James Otero on July 28. Although he faces a maximum sentence of 25 years in prison, prosecutors have agreed to recommend that he spend no more than six months in prison, followed by six months of home detention, Reuters reports.
