The Securities and Exchange Commission recently charged Gil Friedman, a private equity consultant, and his friend Kevin Van de Grift with insider trading for trading in securities of payment systems company Verifone Systems, Inc. before its planned acquisition by private equity firm Francisco Partners Management, LP was announced publicly in 2018.
According to the SEC’s complaint, Friedman, who was a consultant for Francisco Partners at the time, shared material, nonpublic information (“MNPI”) regarding Verifone’s planned acquisition with his close friend Van de Grift, a licensed accountant who Friedman knew to be an active day-trader. In breach of his duty of confidentiality owed to Francisco Partners, Friedman allegedly shared the MNPI with Van de Grift just a minute after having a call with the Verifone Deal Partner and the senior deal partner at Francisco Partner who were discussing the acquisition. Based on this MNPI, Van de Grift allegedly purchased 60,000 shares of Verifone stock in the name of his minor children just weeks before Verifone’s acquisition was announced. On the day after the announcement, Van de Grift sold all of his Verifone shares and purportedly realized a profit of approximately $300,000. According to the complaint, Francisco Partners terminated Friedman after learning the details of Van de Grift’s unusual trades.
In its complaint, the SEC charged Friedman and Van de Grift with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking permanent injunctions and civil penalties against the defendants as well as an order prohibiting them from acting as an officer or director of a registered company. The SEC is additionally seeking payments of disgorgement and pre-judgment interest from Van de Grift.