URGENT >> BULLETIN >> MOVING: Former NASDAQ Managing Director Charged Criminally, Sued Civilly In Insider-Trading Case; Donald L. Johnson Pleads Guilty To Criminal Securities Fraud Amid Allegations He Cherry-Picked Information While Serving As Stock-Exchange Gatekeeper

URGENT >> BULLETIN >> MOVING: A former managing director of the NASDAQ stock exchange has been charged by both the SEC and federal prosecutors in an insider-trading case.

Donald L. Johnson, 56, of Ashburn, Va., already has pleaded guilty on the criminal side of things, the Justice Department said.

For its part, the SEC said Johnson abused his position, made trades from his work computer and racked up $755,000 dollars in illegal profits over three years.

Johnson, the SEC said, cherry-picked information on corporate leadership changes, earnings reports, earnings forecasts and regulatory approvals of new pharmaceutical products.

“This case is the insider trading version of the fox guarding the henhouse,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Instead of protecting NASDAQ client confidences, Johnson secretly traded on client information for personal gain, even using his NASDAQ office computer to make the trades.”

Federal prosecutors also used the fox-and-henhouse analogy.

“Insider trading by a gatekeeper on a securities exchange is a shocking abuse of trust, and must be punished,” said Assistant Attorney General Lanny Breuer, head of the Justice Department’s Criminal Division.

Meanwhile, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia said Johnson padded his retirement by cheating.

“He thought he could get away with it by using his wife’s account and inside information to make relatively small trades just a few times a year,” MacBride said.  “But he learned what every other trader on Wall Street must now realize: We’re watching.”

Prosecutors gave the U.S. Postal Inspection Service credit for the criminal bust.

Johnson was a managing director on NASDAQ’s market intelligence desk in New York between 2006 and September 2009, prosecutors said.

“Johnson brazenly stole nonpublic information from NASDAQ and its listed companies in breach of his duties of confidentiality to his employer and clients,” said Antonia Chion, associate director of the SEC’s Division of Enforcement.

Criminal securities fraud carries a maximum penalty of 20 years in federal prison and a maximum fine of $5 million.

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2 Responses to “URGENT >> BULLETIN >> MOVING: Former NASDAQ Managing Director Charged Criminally, Sued Civilly In Insider-Trading Case; Donald L. Johnson Pleads Guilty To Criminal Securities Fraud Amid Allegations He Cherry-Picked Information While Serving As Stock-Exchange Gatekeeper”

  1. You think NASDAQ is bad…. imagine how bad things are down on the OTCBB and the Pink Sheets.

    There is less oversight and more fraud that comes as an outgrowth of less disclosure therein.

    It’s just sad and an indictment of the greed and “me first” philosophy that pervades Wall Street and many exchanges and investment counselors.

    NASDAQ the OTCBB and the Pinks may be smaller numbers than the fraud perpetuity by the Big Houses pushing the CDO’s and other mortgage fraud, but, it still hits Main Street Investors just the same.

    Caveat Emptor!

    ARWR

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  2. ARWR: It’s just sad and an indictment of the greed and “me first” philosophy that pervades Wall Street and many exchanges and investment counselors.

    And society in general.

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