Thirty Individuals Charged in Global Insider Trading Scheme Netting Tens of Millions in Illicit Profits

BOSTON - Charges were unsealed today against 30 defendants in connection with a large-scale, decade-long insider trading scheme that netted tens of millions of dollars in illicit profits. The defendants, who include corporate attorneys and other financial professionals, are alleged to have stolen and used confidential information on nearly 30 merger and acquisition deals from several of the nation's premier law firms, including a firm headquartered in Massachusetts.

Nineteen defendants were arrested today and will make appearances in federal court in Los Angeles, Calif., Fort Lauderdale, Fla. and New York, among other locations. Two defendants located in Russia and Israel are considered fugitives.

The first indictment charges the following 16 defendants with two counts of conspiracy to commit securities fraud, two counts of securities fraud and one count of money laundering conspiracy:

1. Pedram Fejal, 39, of Brooklyn, New York;
2. Brian Fensterszaub, 45, of Hollywood, Fla.;
3. Mark Fensterszaub, 47, of Hollywood, Fla.;
4. Simon Fensterszaub, 50, of Fort Lauderdale, Fla.;
5. Ilya Gavrilov, 56, of Russia;
6. Baruch Igal Hatanian, 39, of Fort Lauderdale, Fla.;
7. Yisroel Horowitz, 50, of Hollywood, Fla.;
8. God Izraelov, 46, of Israel;
9. David Moradi, 35, of Brooklyn, New York;
10. Nicolo Nourafchan, 43, of Los Angeles, Calif.;
11. David Ostrov, 49, of Clifton, New Jersey;
12. Yechiel Salzberg, 51, of Far Rockaway, New York;
13. Abe Shilian, 35, of Brooklyn, New York;
14. Gavryel Silverstein, 43, of Hollywood, Fla.;
15. Joseph Suskind, 39, of Sunny Isles, Fla.; and
16. Robert Yadgarov, 45, of Long Beach, New York.

That indictment also charges Nicolo Nourafchan with two counts of obstruction of justice, and Mark Fensterszaub, Moradi and Suskind with making false statements to law enforcement.

A second indictment charges five defendants with two counts of conspiracy to commit securities fraud, two counts of securities fraud and one count of money laundering conspiracy:

1. Lorenzo Nourafchan, 38, of Los Angeles, Calif.;
2. Nowel Milik, 52, of Brea, Calif.;
3. Nicholas Rudela, 30, of Covina, Calif.;
4. David Makary, 35, of Covina, Calif.; and
5. Stjepan Vinski, 30, of Glendora, Calif.

Milik and Vinski are also charged with obstruction of justice. Makary is also charged with making false declarations before a grand jury, and Milik, Rudela and Vinski are charged with making false statements to law enforcement.

Charges against nine other defendants for securities fraud conspiracy were also unsealed today. The government's investigation is ongoing.

"Our country's financial markets and professional firms should be free from the rampant fraud and breaches of duty that these charges allege," said United States Attorney Leah B. Foley. "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. 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. Today's charges, the result of a years-long investigation with our law enforcement partners, are part of my office's ongoing efforts to ensure a level playing field for all investors."

"With today's arrests, the FBI has dismantled a large-scale, decade-long, international organized criminal network of corporate attorneys and financial professionals who are accused of stealing and trading on material, non-public information from several of our nation's leading law firms, including one right here in Massachusetts. Everyone charged today is accused of scoring significant profits from expected market moves and making out like bandits. That's not merely gaming the system - it's a federal crime," said Ted E. Docks, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division. "Anyone who engages in insider trading fundamentally undermines the trust necessary for our financial markets to function, and the FBI is committed to ensuring that those markets are a level playing field, not just profiting those with friends in the know."

As alleged in the charging documents, Nicolo Nourafchan, who was a licensed corporate attorney at several large law firms, and others, accessed their law firms' internal computer networks to view confidential documents relating to pending acquisitions, including confidential transactions on which Nourafchan did not work, and then provided the material non-public information (MNPI) to others in exchange for kickbacks. Nicolo Nourafchan and his partner, Robert Yadgarov, another New York attorney, allegedly recruited other attorneys and insiders to serve as sources of inside information. In exchange for the MNPI, Nourafchan and Yadgarov allegedly paid their sources kickbacks consisting of up to hundreds of thousands of dollars in cash.

Nourafchan and Yadgarov also allegedly provided the MNPI to a network of traders and middlemen whom they also enlisted to join the scheme. The middlemen, including Gavryel Silverstein and Lorenzo Nourafchan, allegedly provided the MNPI to other traders and tippees as a way of attempting to obscure the connections between sources and traders. Meanwhile, the traders allegedly executed trades while in possession of MNPI, either on Nourafchan and Yadgarov's behalf or on their own behalf, in exchange for their agreement to kickback illicit trading proceeds to Nourafchan, Yadgarov, and others. Many traders allegedly passed the MNPI onto other traders, again in exchange for their agreement to kick back illicit trading proceeds up the chain to the sources of the MNPI, including Nourafchan and Yadgarov.

In total, it is alleged that overseas traders (including Gavrilov and Izraelov) and traders located in California, Florida, New Jersey and New York, among other locations, traded while in possession of MNPI ahead of nearly 30 M&A deals involving public companies, including some of the largest M&A deals of the last decade, on national and foreign securities exchanges.

As alleged, the defendants and other co-conspirators sought to keep law enforcement from learning about the scheme by, among other means, using burner phones, encrypted applications, coded language, including about "flights," and in-person meetups where conspirators turned off their electronic devices or put them elsewhere before communicating with each other.

For example, on or about June 7, 2022, Nicolo Nourafchan, while on a "leave of absence" from a law firm where he worked, allegedly viewed confidential materials on the law firm's document management system regarding a potential acquisition of iRobot, which was a deal that he did not work on. Shortly thereafter, on or about June 16, 2022, Simon Fensterszaub allegedly purchased iRobot securities while in possession of MNPI. On or about June 16, 2022, and continuing through on or about July 8, 2022, Silverstein and Simon Fensterszaub allegedly exchanged the following coded messages before lapsing into an express discussion of the deal:

S. FENSTERSZAUB: We cannot miss this boat!!

S. FENSTERSZAUB: How's the rabbi??

SILVERSTEIN: He's stable

S. FENSTERSZAUB: Is he still scheduled for surgery?

SILVERSTEIN: We are still waiting for the Dr to check if it's still needed

S. FENSTERSZAUB: Now I'm confused and worried at the same time

SILVERSTEIN: U shouldn't be worried

S. FENSTERSZAUB: Well have you gotten through to anyone at the hospital | Any chance you can find out today how the Rabbi is feeling | ?

SILVESTEIN: Unfortunately nothing

S. FENSTERSZAUB: Dude that's scary

SILVERSTEIN: Yeah

S. FENSTERSZAUB: Should I tell ppl to pull out?

SILVERSTEIN: Stagnant. No movement on the situation

S. FENSTERSZAUB: Find out if we should bail

. . .

S. FENSTERSZAUB: So what should I advise ppl

SILVERSTEIN: Are they even

S. FENSTERSZAUB: I could find out but based on the current price I would assume so

SILVERSTEIN: So pull. But we might go back at it shortly.

S. FENSTERSZAUB: I have to remember to tell people tomorrow | Had the deal died? Or can we still be hopeful? Any way to find out

SILVERSTEIN: Still be hopeful. I will speak with him today

S. FENSTERSZAUB: I can't tell you how badly I need this

Defendants and other co-conspirators also allegedly traded in brokerage accounts in the names of shell companies and other corporate entities, enlisted others to trade on behalf of co-conspirators, traded in others' brokerage accounts, and traded in foreign brokerage accounts, all to try to evade the detection of U.S. securities regulators and law enforcement. Conspirators allegedly transferred proceeds and kickback payments in cash and through intermediaries and shell companies, in locations like Panama and Switzerland. At times, such payments were allegedly disguised as purported "loans" or business transactions.

The charge of conspiracy to commit Title 18 securities fraud provides for a sentence of up to 25 years in prison, five years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. The charge of conspiracy to commit Title 15 securities fraud provides for a sentence of up to five years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. The charge of Title 18 securities fraud provides for a sentence of up to 25 years in prison, five years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. The charge of Title 15 securities fraud provides for a sentence of up to 20 years in prison, three years of supervised release and a fine of $5 million. The charge of money laundering conspiracy provides for a sentence of up to 20 years in prison, three years of supervised release, and a fine of $500,000 or twice the amount of money involved in the laundering transactions, whichever is greater. The charge of making false statements provides for a sentence of up to five years in prison, three years of supervised release and a fine of $250,000. The charge of obstruction of justice provides for a sentence of up to 20 years in prison, as well as three years of supervised release and a fine of $250,000. The charge of making a false declaration before a grand jury provides for a sentence of up to five years in prison, as well as three years of supervised release and a fine of $250,000.

Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case.

U.S. Attorney Foley and FBI SAC Docks made the announcement today. The U.S. Securities and Exchange Commission provided valuable assistance in this matter. Assistant United States Attorneys Kaitlin R. O'Donnell and Ian J. Stearns of the Securities, Financial & Cyber Fraud Unit are prosecuting the case.

The details contained in the charging documents are allegations. The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.