SEC’s First Derivatives-Based Insider Trading Case Dismissed in Federal Court

June 25, 2010

On June 25, 2010, following a three-week trial, Judge John G. Koeltl of the U.S. District Court for the Southern District of New York dismissed all claims against Renato Negrin, a former portfolio manager for Millennium Partners L.P., and Jon-Paul Rorech, a former bond salesman at Deutsche Bank. Mr. Negrin was represented at trial by a Morvillo Abramowitz trial team led by Lawrence Iason and Linda Fang.

In the SEC’s first-ever insider trading case involving credit default swaps (CDS), the SEC alleged that Mr. Negrin had purchased CDS following his receipt of material nonpublic information provided by Mr. Rorech concerning a proposed debt restructuring by VNU N.V., a Dutch media holding company. 

In a 122-page opinion, Judge Koeltl rejected all of the SEC’s allegations against Messrs. Negrin and Rorech, finding that the SEC’s allegations were wholly without merit. Specifically, the court found that Mr. Negrin had not traded on any inside information, and that neither defendant had acted inappropriately or with any deception. On the contrary, the court concluded that the defendants’ actions were wholly consistent with prevailing custom and practice in the bond market, and that the overwhelming evidence presented at trial compelled the conclusion that the particular information at issue was neither material nor confidential. Finding that the SEC’s allegations were entirely unsupported by the evidence, the court ruled in favor of defendants and dismissed all claims against Mr. Negrin in their entirety.