Ex-Citigroup Banker Among Six Defendants the SEC is Charging with $6 Million Insider Trading Scam

Last week, the Securities and Exchange Commission charged six people, including ex-Citigroup Global Markets’ investment banker Maher Kara and his brother Michael Kara, with taking part in a multimillion-dollar insider trading investment scam that involved tipping others about upcoming merger deals. The Karas were indicted in a California district court. Other defendants include Zahi Haddad, Emile Jilwan, Karim Bayyouk, and Bassam Salman. Except for Salman, all of them allegedly made between $82,000 to $2.3 million, with Maher Kara making over $1.5 million. The SEC wants to the defendants to pay fines, disgorgement, and other relief.

The SEC says that from at least April 2004 to April 2007, Maher Kara told his brother on numerous occasions about deals that were pending involving Citigroup clients in the health care industry. Michael Cara would then buy options and stock in at least 20 companies involved in the Citigroup deals and would give the information to relatives and friends in Illinois and California who would also trade before the deals occurred.

Scam participants reportedly made the most money from trading in Biosite right before an announcement was made in March 2007 that the medical testing company was being acquired. Following the public disclosure, stock price in Biosite increased by more than 50% and Michael Kara and six tippees allegedly made over $5 million in illegal profits.

Two other tippees have agreed to disgorge their illegal profits to settle the SEC allegations. Nasser Mardini disgorged $291,000, while Joseph Azar disgorged $118,000 and will pay a fine. Both are not denying or admitting wrongdoing by settling.

Related Web Resources:
SEC charges former Citi banker with insider trading, Reuters, April 30, 2009
SEC Charges Wall Street Investment Banker and Seven Others in Widespread Insider Trading Scheme, SEC.gov, April 30, 2009
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