A Massachusetts investment advisor has incurred the wrath of the Securities and Exchange Commission and the US Department of Justice after allegedly diverting options trades from his clients’ accounts into his own.
Kevin Amell is facing civil charges from the SEC and criminal charges from the DOJ having been accused by both of perpetrating a fraudulent matched-trades scheme.
In its complaint, the SEC alleges that Amell carried out a fraudulent matched-trades scheme in which he prearranged the purchase or sale of call options between his own account and the brokerage accounts of the fund at prices that were disadvantageous to the fund and advantageous to him. The SEC alleges that in one series of trades involving Amazon securities, Amell generated a $23,000 profit for himself in less than 23 minutes at the fund’s expense.
According to Joseph G. Sansone, Co-Chief of the SEC Enforcement Division’s Market Abuse Unit, “Amell abused his trading authority at least 265 times by matching trades between the fund and his personal account at prices that he intentionally and fraudulently skewed to benefit himself.”
The SEC complaint stated that Amell had profited from his matched trades scheme by either buying call options from the Fund at artificially low prices and selling them shortly afterwards to third parties at higher prices; or by purchasing call options from third parties and selling them shortly afterwards to the Fund at artificially high prices.
In the options markets, as in the equity markets, participants provide quotes for the National Best Bid (NBB) – the highest publicly quoted price a market participant is willing to pay for a security – and the National Best Offer (NBO) – the lowest publicly quoted price a market participant is willing to accept when selling a security. The difference between the two is referred to as the National Best Bid and Offer (NBBO) spread, or simply the spread.
The US Attorney’s Office for the District of Massachusetts filed concurring criminal charges but, as yet, has not put out a press release.
That office is no stranger to high profile criminal cases having previously successfully prosecuted notorious Irish gangster James “Whitey” Bulger.