On November 3, 2021, Donald Blakstad, the owner and principal of a California-based investment fund , was sentenced to 36 months in prison in the US District Court for the Southern District of New York for operating a multi-tiered insider trading scheme and committing securities offering fraud, after he was found guilty in June 2021 of conspiracy, securities fraud, and wire fraud. As part of his sentence, Blakstad also received 3 years of supervised release and was ordered to pay $669,000 in restitution to his victims.
According to the Indictment, between 2016 and 2018, Blackstad obtained material non-public information regarding Illumina, Inc., a San Diego-based biotechnology company, from coconspirator Martha Patricia Bustos who was an accountant in Illumina’s accounting department. On several occasions, Blakstad used this information to trade in Illumina securities shortly before earning announcements and also shared the information with associates who did the same. In an effort to conceal the scheme, Blakstad would occasionally have his associates purchase securities on his behalf. The group would sell their Illumina securities shortly after Illumina’s public earnings announcements for a substantial profit and, collectively, made more than $6 million from the scheme.
In addition, between 2015 and 2019, Blakstad allegedly misappropriated more than $1 million dollars from a number of investors who made up-front payments to purchase securities issued by his investment fund Midcontinental Petroleum Inc. According to the Indictment, Blakstad allegedly used false and misleading representations to entice investors to make lump-sum payments into bank accounts that he controlled, but instead of investing the funds, he diverted a substantial portion to himself and his co-conspirators. He allegedly made additional false and misleading statements to the investors in order to conceal and perpetuate the scheme.
Since at least June of 2019 Bustos has cooperated with federal prosecutors after pleading guilty to charges for her role in the scheme. The Securities and Exchange Commission has also filed separate but related civil charges in August of 2021 against Blakstad, Bustos and a third coconspirator, Robert J. Maron, who allegedly participated in the insider trading scheme, as well as relief defendant, Joubin Torkan, who allegedly received a portion of Maron’s illegal proceeds for placing trades on Maron’s behalf. On September 29, 2021, the court issued a final judgment ordering Torkan to pay more than $122,000 in disgorgement and prejudgment interest. The remaining defendants are awaiting sentencing.
Department of Justice Press Release |Order of Restitution | Blakstad Indictment | SEC Press Release (August 2021) | Department of Justice Press Release (2019) | Final Judgment (Torkan)