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Swiss Trader Spills Secrets of Global Insider Network

Swiss Trader Spills Secrets of Global Insider Network
(Dollar Photo Club)

Thursday, 09 January 2020 02:19 PM

He tapped a safe full of cash to pay off corrupt stock tipsters and used phony invoices for artwork sales to mask some payments. He stole information from his banker girlfriend, placed stories with journalists and disguised illegal trades by using other people to make share purchases.

On Wednesday, Marc Demane Debih, a failed Swiss entrepreneur, revealed to a New York jury the secret methods he used to earn $70 million in illegal profit from a global insider-trading network. Testifying for U.S. prosecutors, he is the government’s star witness in the trial of Telemaque Lavidas, the first to face a U.S. jury after a multiyear government probe of a wider alleged conspiracy.

“We agree (with) each other to share inside information and rumors,” Demane Debih said about his relationship with one member of the network. “If he got inside information, he would give it to me. I would trade it for him.”

Demane Debih has been jailed since his 2018 arrest in Serbia and pleaded guilty in October to 38 insider-trading charges. Prosecutors say he was a key player in a sprawling network of contacts on three continents that shared information about pending corporate takeovers and paid off tipsters -- from executives to bankers to an art collector.

The 49-year-old Demane Debih, who has agreed to cooperate with authorities to reduce his sentence, testified that Lavidas’s tips helped produce profit on shares of Boston-based Ariad Pharmaceuticals Inc.

Lavidas got inside information from his father, who was an Ariad board member at the time, and passed it along to Georgios Nikas, a Greek businessman who owned restaurants in New York, according to prosecutors. Demane Debih, who described Nikas as a friend, said he never got tips directly from Lavidas.

The secret Ariad information stood out from the other tips he got from investment bankers because it came “from somebody who worked there -- in this case a board member,” Demane Debih told jurors on Wednesday.

In addition to Nikas, Demane Debih testified he got leaks from John Dodelande, a French art collector connected to investment bankers. Dodelande sometimes provided him with stolen deal documents and shared information about more than 15 transactions in all, Demane Debih said. He concluded Dodelande’s sources probably worked for Moelis & Co. and Centerview Partners.

Benjamin Taylor, a former Moelis banker, and Darina Windsor, formerly of Centerview Partners, were charged by the U.S. in October. Taylor and Windsor shared a London apartment, sometimes communicating in code and using the pet names “Pops” and “Popsy” in emails, according to the government. They’re charged with providing inside information on 22 companies.

Taylor and Windsor haven’t appeared in court to face the charges. Prosecutors said Taylor is in France and Windsor in Thailand. Dodelande didn’t immediately respond to an email seeking comment.

Guilty Plea

On Tuesday, former Goldman Sachs Group Inc. investment banker Bryan Cohen pleaded guilty to passing confidential information to Demane Debih. Nikas, who faces insider-trading charges, is in Greece and considered a fugitive by the U.S. Lavidas’s father, Athanase Lavidas, hasn’t been charged.

Demane Debih said he got into stock trading about 14 years ago after failed stints at importing coffee, selling cigarettes and trying to bring foreign businesses to Serbia. A diamond business he financed with a partner fell apart after only a couple of months. He used $3 million he got from the sale of a family boat and from an inheritance to fund his initial trading activities.

After trading stocks for a few years, Demane Debih testified that he moved to London from Geneva to find his own sources of information, getting his first tip from a JPMorgan Chase & Co. investment banker. He also described how he got details about pending takeovers involving three mining companies from an unwitting girlfriend who worked at Goldman Sachs.

During one four-year period of insider trading he lived in Switzerland, Greece, the U.K., France, Lebanon and the United Arab Emirates. As part of his guilty plea, he agreed to forfeit about $49 million.

Disguising Trades

He told jurors he learned early on to disguise illegal trades by using other people to make share purchases, buying other stocks in the same sector as the target stock and selling off part of a profitable position before an expected share move. He later came to insist that insider-trading contacts communicate with him in person or on burner phones.

Demane Debih said he took steps to hide the flow of payments from authorities, sometimes paying off tipsters from a cash-filled safe in his apartment. Phony invoices for artworks helped obscure payments to Dodelande, whom he said he paid more than $12 million. Other payments were made to and from companies set up to hide the source of payments. He told jurors that he sometimes used illegal tips to plant stories with financial news outlets, including Bloomberg News, then profited when the stories moved share prices.

Demane Debih said he met Telemaque Lavidas once, at a 2011 birthday dinner for a friend of Nikas. Sometime after the dinner, Demane Debih claims, Nikas told him he had access to information about Ariad from Lavidas’s father.

On cross-examination, defense lawyer Jonathan Streeter worked to minimize the connection between Lavidas, who lives in New York, and Demane Debih. The trader answered “no sir” to a series of questions establishing that he hadn’t ever seen Lavidas after that first meeting and never met his father, whose name he didn’t know.

He never witnessed either Lavidas providing insider information, he said.

2013 Rumor

Streeter suggested that Demane Debih, who faces many years in prison, is lying about Lavidas to reduce his own sentence. He told jurors in his opening statement Monday that Windsor, the former Centerview Partners banker, was the source of Nikas’s Ariad information, not his client.

Since 2013, American prosecutors, working with other countries, have investigated an alleged web of insider-trading that includes residents of the U.S., U.K., France, Switzerland, Israel, Cyprus, Greece and Hong Kong. The participants allegedly used secret information to profit from mergers, regulatory moves and other market-moving actions involving pharmaceutical companies.

Demane Debih told jurors that a Turkish-Swiss contact in Geneva passed along a rumor in 2013 that Ariad was going to be acquired and taken private. He testified that he ran the scenario by Nikas, because he knew Nikas had access to Lavidas. Nikas told him there was nothing to the rumor.

Demane Debih said he “strongly advised” his Geneva contact to sell his position. “I told him I had a very good source,” the trader said. “It was not the time to be long on the stock. It was time to be short on the stock. He was very happy. I saved him a huge loss on this position.”

The case is U.S. v. Lavidas, 19-cr-716, U.S. District Court, Southern District of New York (Manhattan).

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A mysterious Swiss trader tied to an international insider-trading network told New York jurors he made about $70 million from illegal tips from sources on three continents and that he sometimes shared the information with others -- for a price.
swiss, trader, secrets, global, insider
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2020-19-09
Thursday, 09 January 2020 02:19 PM
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