April 25, 2022

SEC charges two Israeli nationals with insider trading

On April 20, 2022, the US Securities and Exchange Commission issued a complaint against Moshe Strugano, an attorney based in Tel Aviv, Israel, alleging that by trading illegally on inside information provided by his friend Rinat Gazit, Strugano gained approximately $1.2 million.  Gazit, who, through her company Gayonona, Ltd., worked as an independent contractor for Ormat Systems Ltd. during the relevant period, is also a defendant in the case.  Both she and Strugano are citizens of Israel.

The complaint alleges that pursuant to a March 2015 agreement between Gayanona and Ormat Systems, Gazit served as head of mergers and acquisitions for Ormat Technologies, Inc., the parent company of Ormat Systems, until her termination in August 2021.  Ormat is an international supplier of geothermal energy founded in Israel and now headquartered in Nevada.  Its stock is listed on both the New York and Tel Aviv stock exchanges. 

According to the allegations, in 2017, previously stalled discussions regarding Ormat’s acquisition of U.S. Geothermal, a geothermal energy company headquartered in Boise, Idaho, were resumed, and Gazit was involved in negotiating the terms of this transaction and conducting the associated due diligence.  As alleged, correspondence from Gazit and a signed undertaking demonstrate her understanding of the highly confidential nature of the acquisition details, including the share price; and WhatsApp exchanges with Strugano appear to evidence a pre-arranged code to signal the final acquisition agreement between Ormat and US Geothermal.  On the day of those communications and during several weeks thereafter, Strugano, using an investment account owned and controlled solely by him, purchased 740,650 shares of U.S. Geothermal (nearly a 5% holding of the company), selling all of them at a profit of $1.2 million during the period following Ormat’s public announcement on January 24, 2018 of its acquisition of U.S. Geothermal.  According to the complaint, Strugano attempted to conceal the illegality of his trades by asking his broker to delete messages, and lied to bank investigators about his relationship with Gazit.

The compliance department of Strugano’s Swiss bank initiated an investigation shortly following the first sale U.S. Geothermal shares following publication of the acquisition.  The bank ultimately terminated its relationship with Strugano.  The SEC’s complaint alleges that Gazit’s and Strugano’s conduct violated the anti-fraud provisions of Section 10(b) of the Exchange Act of 1934  (15 U.S.C. § 78j(b)) and Rule 10b-5 thereunder (17 C.F.R. § 240.10b-5).  The SEC seeks a permanent injunction against further violations, disgorgement of ill-gotten gains, a prohibition against Gazit’s acting as officer or director of a registered issuer, and civil money penalties.

SEC press release | Complaint