The SEC charged Toby G. Scammell with making illegal profits of over $192,000 from insider trading after he learned from his girlfriend about the impending acquisition of Marvel Entertainment, Inc. by the Walt Disney Company.
The SEC charged Scammell with insider trading in its complaint filed in the United States District Court for the Central District of California and has alleged that Scammell purchased highly speculative Marvel call options for less than $5500. After the August 31, 2009 announcement that Marvel would be acquired by Disney, Marvel’s stock price increased over 25% and Scammell sold the Marvel options for a profit of more than $192,000 — a 3000% return in less than one month.
The SEC alleges that Scammell’s girlfriend worked on the Marvel acquisition while she was an extern in the Disney corporate strategy department. According to the SEC, Scammell’s girlfriend learned confidential information about the deal, including that Disney would pay $50 per share for Marvel and that the deal would be announced by Labor Day. Scammell purchased Marvel call options with strike prices of $50 and $45 even though Marvel had never traded above $41.74. The SEC alleges that most of the Marvel options Scammell purchased were set to expire on September 19, 2009, just a few weeks after Disney announced it would acquire Marvel. The SEC states that Scammell’s trades were so unusual that his purchase of options represented 100% of the market in many instances. At the time he purchased the Marvel call options, Scammell worked as an associate at an investment fund in Northern California, according to the complaint. The SEC also noted that just before he purchased many of the Marvel securities, Scammell searched the internet for the terms “insider trading,” “material, non-public information,” and “Rule 10b-5.”
According to the SEC, Scammell secretly used his brother’s money to purchase the majority of the Marvel call options. The SEC alleges that Scammell’s brother gave him authority to manage his finances when he was deployed to serve in Iraq with the U.S. Army and this arrangement continued when Scammell’s brother returned to the United States. However, the SEC stated that Scammell never told his brother that he had invested his money in Marvel or that his brother’s account had increased by more than $100,000 in less than one month as a result of the Marvel trades, according to the complaint.
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