SEC, DOJ charge traders with fraud in $47M front-running scheme

In a parallel action, the Department of Justice (DOJ) is pursuing criminal charges against the duo: Lawrence Billimek, an equity trader who since 2012 has worked for an asset manager in New York that handles about $283 billion in client funds, and day trader Alan Williams.

Williams, 77, is a retired head equity trader who last worked at a large firm. He had been working in the securities industry since 1971.

The asset manager Billimek works for regularly bought and sold securities in such large quantities that the price of the stocks would rise and fall in a predictable way, according to the SEC. The unnamed asset manager provides portfolio management services to eight advisory funds, each one an investment company, the agency said.

From at least September 2016 through at least August 2022, Billimek fed information about his firm’s upcoming, market-moving trades to Williams, who would then time the selling of identical securities so he would benefit from the change in price, according to the SEC’s complaint, filed in U.S. District Court for the Southern District of New York.

Billimek is accused of using pre-paid “burner” cell phones in the front-running scheme to communicate with Williams, a DOJ grand jury charged in a unsealed indictment, also filed in U.S. District Court for the Southern District of New York.

Williams made at least $47.3 million in profits on more than 1,000 trades he made that correlated with the asset manager’s trades, the SEC alleged.

Williams paid Billimek millions for tipping him off about the market-moving trades, according to the indictment. Billimek listed the funds as “gifts,” the DOJ said in a press release announcing its charges.

The SEC used data analytics and its Consolidated Audit Trail database to catch a pattern in Williams’ trades, in which they were consistently timed with those of the asset manager, according to the agency.

“Billimek allegedly took advantage of his position and abused his employer’s trust by providing Williams with proprietary information that allowed them to gain a trading advantage and pocket tens of millions of dollars in profits,” said Joseph Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit.

The SEC charged Billimek and Williams with violating antifraud provisions of federal securities laws. The agency is seeking disgorgement plus interest, penalties, and injunctive relief.

A DOJ grand jury charged Billimek and Williams with conspiracy to commit securities fraud and wire fraud, securities fraud, and wire fraud.