Elite M&A Lawyers Fed Massive Insider-Trading Ring, US Says (1)

Lawyers from top mergers and acquisitions firms provided tips on some of the biggest deals of the last decade to an insider trading ring that made tens of millions of dollars in illegal profits, federal prosecutors said.

Two indictments charging 30 people were unsealed Wednesday in federal court in Boston. None of the firms from whom information was allegedly stolen were identified by prosecutors, but detailed descriptions of the relevant deals indicate they included Wachtell Lipton Rosen & Katz, Latham & Watkins and Goodwin Procter.

According to the indictments, as well as a parallel suit filed by the Securities and Exchange Commission on Wednesday, Nicolo Nourafchan, a 2011 Yale Law School graduate who worked at three large firms, including Goodwin and Latham, from 2013 to 2023, misappropriated confidential deal information from those employers. He allegedly conspired with a college classmate, Robert Yadgarov, to recruit other corporate lawyers to provide tips.

Nourafchan, 43, and Yadgarov, 45, then allegedly provided those tips to a network of relatives, friends, classmates and associates, many of whom were also charged. Authorities allege the defendants went to great lengths to conceal their activity, using burner phones, encrypted applications and clandestine meetings.

‘How’s the Rabbi?’

They also discussed the tips in code, referring to them as airline “flights” and discussing the upcoming public disclosure of merger plans as dates on which a “rabbi” was scheduled for surgery, according to prosecutors.

“I really need to know when the rabbi is scheduled for surgery,” one defendant allegedly wrote in a text several weeks before Amazon.com Inc.’s August 2022 announcement to acquire Roomba maker iRobot Corp., writing again days later, “How’s the rabbi?”

“He’s stable,” another alleged ring member responded, suggesting there was no reason to be worried about missing the date.

Lawyers for the defendants couldn’t immediately be identified. Prosecutors said 19 people were arrested today and are scheduled to appear in court in locations including California, Florida and New York. Two other defendants located in Russia and Israel are considered fugitives. It’s unclear what the status of the other defendants is.

In a statement, Goodwin said: “We are deeply disappointed that a former employee is alleged to have violated the trust placed in him and misused confidential information as part of a broader criminal scheme affecting multiple law firms and their clients. We have been cooperating and continue to cooperate fully with law enforcement.”

Yale Classmate

Among the co-conspirators described in one of the indictments was a Yale classmate of Nourafchan’s who worked at the law firm that advised Anadarko Petroleum Corp. on its $55 billion acquisition by Occidental Petroleum Corp. in 2019 and Tim Hortons Inc. in its $11 billion takeover by Burger King Worldwide Inc.in 2014. That firm was Wachtell.

“The responsible party left Wachtell Lipton over four years ago,” a spokesperson for the firm said in a statement. “There are no allegations of wrongdoing against the firm. Wachtell Lipton has cooperated fully with the US Attorney’s office and will continue to do so.”

Several other firms described in the indictment didn’t immediately respond to requests for comment.

Latham & Watkins, another of Nourafchan’s former employers, said in a statement: “The former associate charged today has not been associated with our firm for five years, and the conduct as alleged would reflect a serious violation of our robust policies and procedures.”

“The trading on unannounced financial news alleged here not only violated the securities laws, but it also took advantage of the special access and ethical duties that come with a law license,” Massachusetts US Attorney Leah B. Foley said in a statement. “If the American people believe that trading is only for the connected, they will keep their investment and retirement savings out of the markets, which will hurt our economy.”

In 2018, Nourafchan recruited another former classmate to join the scheme, telling him that he had a “side business” obtaining information on deals and trading on it. The SEC complaint alleges that Nourafchan described how he obtained the information, searching his firm’s document management system and viewing documents in preview or read-only mode to hide his digital footprint.

The cases are US v. Fejal, 26-cr-10133, and US v. Nourafchan, 26-cr-10115, US District Court, District of Massachusetts.

(Updates with SEC suit, additional detail from complaints.)

--With assistance from Mahira Dayal, Brian Dowling, Meghan Tribe, Tatyana Monnay, Roy Strom and Nicola M White.

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