Roda was entrusted by his employer with critical, market-moving information, and he betrayed that trust by using the information to trade and also tip his friend so they could both profit.Federal agents have charged a former Penn National Gaming (PNG) software engineer with insider trading, alleging that he and a friend used confidential information about PNG’s upcoming $2 billion acquisition of Score Media to make illegal profits of more than $560,000.
On Monday, the US Securities and Exchange Commission (SEC) announced that it had leveled insider trading charges against the former engineer and his friend — David Roda and Andrew Larkin, respectively, both aged 36 and residents of Philadelphia. The SEC filed a criminal complaint in US District Court for the Eastern District of Pennsylvania.
“As we allege in our complaint, Roda was entrusted by his employer with critical, market-moving information, and he betrayed that trust by using the information to trade and also tip his friend so they could both profit,” said Scott Thompson, Co-Acting Regional Director of the SEC’s Philadelphia Regional Office.
“When employees like Roda misappropriate and trade on confidential information, it erodes market confidence. The SEC remains committed to finding, investigating, and charging those who engage in insider trading.”
SEC Alleged Scheme Began in July 2021
According to the complaint, Roda caught wind of PNG’s plans to acquire Score Media in early July 2021 from a co-worker as Director of Backend Architecture for Penn Interactive Ventures, a PNG subsidiary. Roda was eventually added to the due diligence team working on the deal.
Roda bought and sold several call options of Score Media in early July but sold them for a loss of approximately $1,600 after PNG’s Chief Legal Officer warned Roda that he was in possession of “material non-public information” about the upcoming acquisition.
In the days and weeks leading up to the announcement that PNG would acquire Score Media in a cash-and-stock deal valued at $2 billion, the SEC alleges Roda acquired 500 out-of-money call options of Score Media for about $20.935. Meanwhile, Larkin had purchased 375 shares for approximately $6,750 after being tipped off by Roda.
Shares of Score Media jumped 80% after the PNG deal was made public on August 5, 2021. Roda and Larkin sold their stock in Score Media that same day. According to the SEC, Roda netted approximately $560,762 from the scheme while Larkin pocketed $5,602.
The complaint alleges that on the day the defendants sold their shares, Larkin had suggested that Roda use his illegal gains to buy a beach house, to which Roda quipped, “ya, if the SEC doesn’t come take it and put me in jail.”
It was unclear when Roda left PNG’s employ.
Defendants Have Agreed to Return Illegal Profits
The SEC said Roda agreed to surrender (aka disgorge) his ill-gotten gains and to pay prejudgment interest and a civil penalty to be determined by the court. In a parallel move, the US Attorney’s Office for the Eastern District of Pennsylvania said it would file criminal charges against Roda.
Larkin agreed to pay more than $11,000 in disgorgement and penalties but did not admit or deny the SEC’s allegations. It did not appear that prosecutors had filed criminal charges against Larkin.
Both settlements are subject to court approval.
Jeff Morris, PNG’s Vice President for Public Affairs, told Pennsylvania Gaming Review that the company “took this matter very seriously and cooperated fully with the government investigations that led to the charges announced yesterday against this former employee.
“We maintain comprehensive policies and procedures and provide extensive training to help prevent trading on material non-public information. We are pleased that this matter has been promptly resolved.”
The insider trading allegations at PNG come less than one week after authorities in Sweden raided the headquarters of LeoVegas and announced an insider trading probe of MGM Resorts International’s proposal to buy the company for $607 million.