From Hedge Fund Rising Star Sean Wygovsky to Alleged Front Runner
Posted on 07/02/2021
The United States Department of Justice filed charges in Manhattan federal court against Sean Wygovsky (age 40). The DOJ charged him with securities fraud and wire fraud in connection with his scheme to steal confidential information about the trade orders of his employer, Toronto-based Polar Asset Management Partners, in order to conduct hundreds of timely, profitable personal securities trades in the same stocks as Polar Asset Management Partners. Sean Wygovsky attempted to hide his conduct by trading or causing trading in brokerage accounts held in the names of his close relatives. Sean Wygovsky was arrested on the morning of July 2, 2021 in Austin, Texas, and is expected to be presented in federal court this afternoon before a U.S. Magistrate Judge for the Western District of Texas. Wygovsky is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Sean Wygovsky illegally exploited his access to his employer firm’s yet-to-be-executed trade orders to make numerous trades in anticipation of the bump or dip the firm’s buying or selling would cause. To conceal the scheme, Wygovsky allegedly made his front running trades through brokerage accounts of certain of his relatives. As alleged, Wygovsky made or directed over 700 timely transactions that netted him more than $3.6 million in illegal profits. Now Sean Wygovsky is in custody and facing serious criminal charges.”
FBI Assistant Director William F. Sweeney Jr. said: “Over the course of several years, as alleged, Wygovsky made hundreds of short-term trades based on inside information that ultimately reaped more than $3 million in profits. Schemes like the one alleged here grossly affect the integrity of our financial markets and remain a top priority for our financial fraud investigative teams.”
In 2006, Wygovsky worked at Tiger Management Corporation as a trader. In 2013, he became a Partner, Trader, and Portfolio Manager at Polar Asset Management Partners. In June 2016, Wygovsky was profile in Institutional Investor publication as a 2016 rising hedge fund star. Polar Asset Management Partners has at least approximately US$ 19 billion in assets under management.
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DOJ Press Release
The Front Running Scheme
Based on his position as a trader at the Employer Firm, WYGOVSKY had access to the trade information and trade orders of the Employer Firm. Like most large asset managers, the Employer Firm had rules and regulations concerning employees’ personal trading, including requirements about the confidentiality of client information and prohibitions against insider trading and personal trading in the same securities as the Employer Firm. The size of the Employer Firm’s trade orders often caused slight, temporary movements in the price of the securities traded. For example, if the Employer Firm engaged in a large purchase of stock, the increased demand could cause a slight rise in the stock price, and if the Employer Firm engaged in a large sale of stock, the increased supply could cause a slight drop in the stock price. Because WYGOVSKY had access to the Employer Firm’s trade orders, he knew in advance when a particular stock price would move slightly up or down based on that trading.
WYGOVSKY’s relatives maintained brokerage accounts for the personal purchase and sale of securities. In particular, Relative-1 maintained at least one brokerage account and Relative-2 and Relative-3 maintained at least four brokerage accounts (the “Subject Accounts”). From at least 2015 through April 2021, after obtaining information about the Employer Firm’s upcoming trading activity but before those trades were executed, WYGOVSKY caused the Subject Accounts to buy or sell the same securities the Employer Firm would be buying or selling, in order to profit through the subsequent movement of the stock that would often result from the Employer Firm’s trading. WYGOVSKY would then cause the Subject Accounts to exit those positions once the Employer Firm’s trading was underway, often within hours of when the Subject Accounts had first entered the positions. For example, if WYGOVSKY knew that the Employer Firm would be buying a particular stock, WYGOVSKY would cause one or more of the Subject Accounts to purchase that stock beforehand in relatively small amounts. Then, as the Employer Firm made relatively large purchases, the stock price would increase and WYGOVSKY would cause the Subject Accounts to sell their holdings at a profit.
At times, WYGOVSKY personally conducted the trading on behalf of both the Employer Firm and the Subject Accounts. For example, on occasion, IP log-ins from the Subject Accounts show the Subject Accounts were being accessed from locations where WYGOVSKY was travelling. On other occasions, WYGOVSKY would cause others to execute the timely, profitable trading in the Subject Accounts. Over an approximately five-year period, WYGOVSKY caused the Subject Accounts to engage in more than 700 such short-term timely, profitable trades, resulting in at least over $3.6 million of profits in the Subject Accounts.
Financial Transfers Back to Wygovsky
During the course of the front running scheme, Relative-2 and Relative-3 caused at least approximately hundreds of thousands of dollars to be sent back to WYGOVSKY from the Subject Accounts. For example, between 2015 and 2020, Relative-2 and Relative-3 moved millions of dollars from the Subject Accounts to bank accounts that they controlled, and wrote checks to WYGOVSKY and his immediate family members for hundreds of thousands of dollars. Furthermore, in or about late 2017 and early 2018, Relative-2 and Relative-3 transferred hundreds of thousands of dollars to a Slovenian bank for the benefit of certain relatives of WYGOVSKY’s wife.
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