Case 2:19-cr-00780-WJM Document 1 Filed 02/13/19 Page 1 of 18 PageID: 1

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA : Hon. Mark Falk

v. : Mag. No. 19-3507

GENE LEVOFF : CRIMINAL COMPLAINT

I, Robert M. Napolitano, being duly sworn, state the following is true and
correct to the best of my knowledge and belief:

SEE ATI’ACHMENT A

I further state that I am a Special Agent with the Federal Bureau of

Investigation and that this Complaint is based on the following facts:

SEE A’fl’ACHMENT B

continued on the attached page and made a part hereof.

S ecial Agent Robert M. Napolitano

Federal Bureau of Investigation

Sworn to before me and subscribed in my presence,

February 13, 2019 at Newark, New Jersey

HONORABLE MARK FALK

UNITED STATES MAGISTRATE JUDGE Si nature of Judicial Officer
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ATTACHMENT A

Count One
(Securities Fraud)

From in or around February 2011 through in or around April 2016, in

Hudson County, in the District of New Jersey, and elsewhere, defendant

GENE LEVOFF

did unlawfully, willfully, and knowingly, directly and indirectly, by the use of
the means and instrumentalities of interstate commerce, and the mails and of
the facilities of national securities exchanges, in connection with the purchase
and sale of securities, use and employ manipulative and deceptive devices and
contrivances, in violation of Title 17, Code of Federal Regulations, Section
240. iOb-5, by (a) employing devices, schemes, and artifices to defraud; (b)
making untrue statements of material facts and omitting to state material facts
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and (c) engaging
in acts, practices, and courses of business which operated and would operate
as a fraud and deceit upon persons, to wit: by executing and causing others to
execute securities fransactions in the securities of Company-i on the basis of
material nonpublic information concerning Company-i in breach of a duty of
trust and confidence that was owed directly, indirectly, and derivatively to the
issuers of those securities, the shareholders of the issuers, and to other
persons who were the source of the material nonpublic information.

In violation of Title 15, United States Code, Sections 78j(b) and 78ff, Title
17, Code of Federal Regulations, Section 240. iob-5 and 240. iOb5-2, and Title
18, United States Code, Section 2.
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ATTACHMENT B

I, Robert M. Napolitano, am a Special Agent with the Federal Bureau of

Investigation (“FBI”). I am fully familiar with the facts set forth herein based on
my own investigation, my conversations with law enforcement officers,
witnesses, and others, and my review of reports, documents, and items of
evidence. Because this Complaint is being submitted for a limited purpose, I
have not set forth each and every fact that I know concerning this
investigation. Where statements of others are related herein, they are related
in substance and in part. Where I assert that an event took place on a
particular date, I am asserting that it took place on or about the date alleged.
All times are approximate and, unless otherwise noted, are in the Pacific Time
Zone.

Background Information

1. At all times relevant to this Complaint:

a. Company-i was a global technology company headquartered

in Cupertino, California that designed, developed, and sold consumer
electronics, computer software, and online services. Company-i was a publicly
traded company whose securities were listed on the NASDAQ Stock Market. In
terms of market capitalization, Company-i was consistently among the most
valuable companies in the world.

b. Defendant GENE LEVOFF (“LEVOFF”) was employed by

Company-i at its headquarters in Cupertino. From in or around 2008 through
in or around 2013, LEVOFF, an attorney, was the Director of Corporate Law at
Company-i. From in or around 2013 through his termination in or around
September 2018, LEVOFF was the Senior Director of Corporate Law at
Company-i. In that role, LEVOFF functioned as the top corporate attorney at
Company-i, reporting directly to Company-i’s General Counsel. Among other
things, LEVOFF was responsible for overseeing Company-i’s compliance with
securities laws, which included advising others regarding U.S. Securities and
Exchange Commission (the “SEC”) filings and financial reporting. In or around
February 20i8, Company-i named LEVOFF its Corporate Secretary, a title he
maintained until his termination. Before that, LEVOFF held the role of
Assistant Secretary. from in or around September 2008 through in or around
July 20i8, LEVOFF served on Company-i’s Disclosure Committee, and, as a
result, had access to and obtained Company-i’s draft SEC filings and earnings
materials before Company-i disclosed its quarterly and yearly financial results
to the public. LEVOFF served as one of the Disclosure Committee’s co
chairpersons from in or around December 2012 through in or around July
2018.
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c. first Republic Securities Company, LLC (“first Republic”)

was a brokerage firm based in San Francisco, California that provided various
investment services, including online investing. LEVOFF maintained an
account with First Republic (the “first Republic Account”) that he used, among
other things, to buy and sell securities, including Company-i stock.

d. TD Ameritrade was a brokerage firm based in Omaha,

Nebraska that provided online investing services for institutions and
individuals. LEVOFF maintained a brokerage account with TD Ameritrade (the
“TD Ameritrade Brokerage Account”) that he used, among other things, to buy
and sell securities, including Company-i stock.

e. Virtu Americas, LLC, f/k/a KCG Americas LLC, f/k/a Knight

Capital Markets (“Virtu”) was a market maker i.e., a firm that stands ready to
—

buy and sell a particular stock on a regular and continuous basis at a publicly
quoted price, thus providing liquidity to the market. The servers that housed
Virtu’s electronic trading systems and executed trades involving those systems
were located in Jersey City, New Jersey.

f. Susquehanna International Group, f/k/a Gi Execution

Services, LLC (“Gi”) was a market maker. The servers that housed Gi’s
electronic trading systems and executed trades involving those systems were
located in Secaucus, New Jersey.

g. BNY Mellon Capital Markets, LLC (“BNY Mellon”) was a

market maker. The third-party affiliate servers that housed BNY Mellon’s
electronic trading systems were located in Carteret, New Jersey.

h. Two Sigma Securities, LLC (“Two Sigma”) was a market

maker. The servers that housed Two Sigma’s electronic trading systems and
executed trades involving those systems were located in Secaucus, New Jersey.

The Insider Trading Scheme

2. From in or around February 2011 through in or around April

2016, LEVOFF orchestrated a scheme to defraud Company-i and its
shareholders by misappropriating material nonpublic information regarding
Company- i’s financial results in order to execute favorable trades involving the
securities of Company-i. These trades caused LEVOFF to realize profits of
approximately $227,000 and to avoid losses of approximately $377,000.

3. In particular, LEVOFF used his position as a member and/or an

invitee of Company-i’s Disclosure Committee to obtain material nonpublic
information regarding Company- i’s financial results before Company-i
disclosed that information to the public.

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4. LEVOFF converted the material nonpublic information to his own

use by executing trades involving Company-i stock in the TD Ameritrade
Brokerage Account and/or the first Republic Account before Company-i
disclosed its financial results to the public. When LEVOFF discovered that
Company-i had posted strong revenue and net profit for a given fmancial
quarter, he purchased large quantities of Company-i stock, which he later sold
for a profit once Company-i disclosed the positive earnings information to the
public and the market reacted to the news. Conversely, when LEVOFF learned
that Company- i had posted lower-than-anticipated revenue and net profit, he
sold large quantities of Company-i stock, thus avoiding the significant losses
that would occur once Company-i disclosed the information to the public and
the market reacted to the negative news regarding Company-i’s earnings.

5. A number of the trades referenced in this Complaint were executed

with market maker counterparties whose electronic trading systems and/or
servers were located in the District of New Jersey, namely, Virtu, G 1, BNY
Mellon, and Two Sigma.

6. When LEVOFF executed each of the trades described in this

Complaint, he was subject to a regular company-imposed “blackout period”
that prohibited him and others like him with access to material nonpublic
information regarding Company-i from engaging in trades involving Company
i stock. LEVOFF ignored this restriction, as well as Company- i’s Insider
Trading Policy, and instead repeatedly executed trades based on material
nonpublic information without Company- i’s knowledge or authorization.

Company-i’s Periodic SEC Filings, Public Disclosures

of Financial Results, and the Disclosure Committee

7. At all times relevant to this Complaint, Company-i divided its

financial year into four quarters that each consisted of three calendar months:
or first quarter (October, November, December); “Q2” or second quarter
(January, February, March); “Q3” or third quarter (April, May, June); and “Q4”
or fourth quarter (July, August, September). As with other publicly traded
companies, Company-i was required to file quarterly form iO-Q reports and
annual Form 10-K reports with the SEC. Among other things, Company-i’s
periodic SEC filings contained information regarding Company- i ‘s quarterly
and yearly financial results. Once filed, Company- i’s SEC filings were
available online to the public.

8. Company-i typically disclosed its quarterly and yearly financial

results to the public shortly before its SEC filings. Company-i announced its
earnings via press releases and executive remarks, which occurred in or
around the following dates each financial year: late-January or early-february
(Q 1 financial results); late-April or early-May (Q2 financial results); late-July or

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early-August (Q3 financial results); and late-October or early-November (Q4

and yearly financial results).

9. At all times relevant to this Complaint, Company-i had a

Disclosure Committee that reviewed and discussed Company-i’s draft SEC
filings and its draft public disclosures of financial results before they were filed
with the SEC and/or disclosed to the public. The composition of the
Disclosure Committee changed over time, but its members typically consisted
of high-level executives within Company-i, including Vice Presidents and
Directors of various groups. The Disclosure Committee also included various
“invitees,” who were typically high-ranking employees within those groups. At
any given point, the Disclosure Committee’s members and invitees generally
totaled approximately fourteen to approximately eighteen individuals.

iO. At all times relevant to this Complaint, LEVOFF was a member

and/or an invitee of the Disclosure Committee. Beginning in or around
December 2012 and continuing through in or around July 2018, LEVOFF led
the Disclosure Committee, serving as one of its co-chairpersons.

1 1. The Disclosure Committee typically met one or two weeks before

Company-i filed its Form iO-Q/Form iO-K reports with the SEC and/or
disclosed its financial results to the public. The Disclosure Committee
meetings took place at Company- i ‘s headquarters in Cupertino, although some
Disclosure Committee members and/or invitees participated in meetings by
telephone. During the meetings, Disclosure Committee members and invitees
reviewed and discussed Company-i’s draft SEC filings and/or draft earnings
materials that would later be disclosed to the public.

12. A few days before each Disclosure Committee meeting, Disclosure

Committee members and invitees received an email or series of emails
attaching Company-i’s draft SEC filings and/or draft earnings materials,
which included information regarding Company- i’s financial results.

i 3. The information regarding Company- i’s financial results that

Disclosure Committee members and invitees received by email, and later
reviewed and discussed during Disclosure Committee meetings, was material
nonpublic information. The information ceased being material nonpublic
information only after Company-i disclosed the information to the public in
SEC filings and/or through press releases.

i4. As a Disclosure Committee member and high-ranking Company-i

employee, LEVOFF owed a fiduciary duty to Company-i and its shareholders to
protect material nonpublic information regarding Company- i to which he had
access. LEVOFF further owed Company-i and its shareholders a duty not to
use such material nonpublic information for his own personal benefit.

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Company-i’s Insider Trading Policy and Regular Blackout Periods

15. At all times relevant to this Complaint, Company-i prohibited its

officers, directors, employees, consultants, independent contractors, and their
immediate families from engaging in insider trading. Company-i memorialized
this prohibition against insider trading in its “Insider Trading Policy,” which
Company-i periodically amended. Two Insider Trading Policies were in effect
during the time period covered by this Complaint: an Insider Trading Policy
dated August 21, 2003 (the “August 2003 Insider Trading Policy”) and, later, an
Insider Trading Policy dated September 2015 (the “September 2015 Insider
Trading Policy”).

16. Company-i’s August 2003 Insider Trading Policy prohibited any

officer, director, employee, consultant, independent contractor, or immediate
family member who received or had access to material nonpublic information
regarding Company-i from engaging “in any transaction involving a purchase
or sale of [Company- i’s] securities” from the date he or she possessed material
nonpublic information until either sixty hours after public disclosure of the
information or at such time as the nonpublic information was no longer
material. Similarly, the September 2015 Insider Trading Policy prohibited
individuals from “buy[ing] or sell[ing] [Company-i] stock when aware of
information that ha[dJ not been publicly announced and that could have a
material effect on the value of the stock” until either twenty-four hours after
public disclosure or when the information was no longer material.

17. The August 2003 and September 2015 Insider Trading Policies
each identified Company-i’s “financial results” among the various categories of
sensitive material information that could form the basis of insider trading. The
August 2003 and September 2015 Insider Trading Policies also warned
employees that engaging in transactions involving Company-i’s stock while in
possession of material nonpublic information regarding Company-i violated
federal securities laws.

18. Since at least in or around 2010, LEVOFF had responsibility for

ensuring compliance with Company- i’s Insider Trading Policy. In or around
2015, LEVOFF initiated and oversaw an update of the policy that resulted in
the revised September 2015 Insider Trading Policy.

19. At all times relevant to this Complaint, Company-i instituted a

regular “blackout period” ahead of its public disclosure of Company- i’s
periodic financial results. During these blackout periods, individuals likely to
possess material nonpublic information regarding Company-i sometimes
—

referred to as “insiders” were prohibited from buying or selling Company-i

—

securities. Company-i’s blackout periods generally began on the first day of

the last month of a fiscal quarter i.e., December/Qi, March/Q2, June/Q3,
—

and September/Q4 and ended either sixty or twenty-four hours (depending

-

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on the Insider Trading Policy in effect at the time) after Company-i publicly
disclosed its periodic financial results in a press release.

20. Prior to each blackout period, Company-i sent an email to

individuals subject to the blackout period notifying them (i) that they were
subject to the blackout period and therefore prohibited from buying or selling
Company-i stock during that period, and (ii) of the dates the blackout period
began and ended. The blackout period emails also reiterated and summarized
Company- l’s prohibition against insider trading.

21. At certain times relevant to this Complaint, LEVOFF’s compliance

responsibilities in connection with insider trading included notifying
individuals subject to the blackout period or supervising individuals who made
the notifications. On several occasions, LEVOFF authored and disseminated
the blackout period notification emails himself. LEVOFF also played a role in
determining who should be placed on the blackout list.

22. At all times relevant to this Complaint, LEVOFF a member

—

and/or an invitee of the Disclosure Committee with access to material

nonpublic information regarding Company-i was subject to Company-i’s
—

blackout periods. As with other insiders, Company-i notified LEVOFF by email

that he was subject to the blackout periods and of the specific dates of the
blackout periods.

23. At no time relevant to this Complaint was LEVOFF authorized by

Company-i or by any other entity to buy or sell Company-i stock while in
possession of material nonpublic information regarding Company-i, nor was
he authorized to buy or sell Company-i stock during any applicable blackout
period.

LEVOFF Trades Ahead of Company-i’s

02 2011 Earnings Announcement

24. The blackout period for Q2 2011 began on or about March i, 2011
and ended on or about April 25, 201 i (the “Q2 2011 Blackout Period”).

25. On or about February 24, 2011, LEVOFF sent an email to

individuals subject to the Q2 2011 Blackout Period bearing the subject line,
“Commencement of Trading Blackout March 1, 2011.” In the email, LEVOFF
-

— who was himself subject to the Q2 2011 Blackout Period notified the
—

recipients that, starting on or about March 1, 2011, they and their immediate
family members were prohibited from engaging in “any transactions in
[Company-il securities” until sixty hours after Company-i announced its
quarterly earnings in or around April 2011. LEVOFF stated in the email that
Company- i’s Insider Trading Policy prohibited individuals from buying or
selling Company-i stock if they possessed material nonpublic information

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regarding Company-i. Specifically, LEVOFF wrote: “Pursuant to [Company-i’s]

Insider Trading Policy, you are prohibited from any transactions in [Company-
1] securities if you possess or have access to material nonpublic information
regarding [Company- 1].” To emphasize that Company- l’s prohibition against
insider trading applied regardless of whether a blackout period was in place,
LEVOFF wrote at the top of the email, in capitalized letters: REMEMBER,
TRADING IS NOT PERMITTED, WHETHER OR NOT IN AN OPEN TRADING
WINDOW, IF YOU POSSESS OR HAVE ACCESS TO MATERIAL INFORMATION
THAT HAS NOT BEEN DISCLOSED PUBLICLY ***“ LEVOFF concluded the
email by reiterating that trading on material nonpublic information was
impermissible and encouraged the recipients to contact a Company-i employee
to discuss any questions they had regarding the policy.

26. On or about April 8, 2011, members and invitees of the Disclosure

Committee, including LEVOFF, received an email attaching Company-i’s draft
Form i0-Q report for Q2 2011. The draft Form 10-Q report contained
information about Company- i’s earnings, including revenue and net profit for
Q2 2011.

27. Several hours later, members and invitees of the Disclosure

Committee, including LEVOFF, received an email attaching draft earnings
materials for Q2 2011, including a draft press release, financials, and prepared
executive remarks.

28. On or about April ii, 2011, the Disclosure Committee met at

Company-i’s headquarters in Cupertino. LEVOFF attended the meeting in
person as a Disclosure Committee invitee. During the meeting, Disclosure
Committee members and invitees reviewed and discussed Company-i’s
proposed Q2 2011 disclosures, including its draft Form iO-Q report and its
draft press release regarding earnings.

29. On or about April 13, 2011, LEVOFF purchased approximately

3,140 shares of Company-i stock in the TD Ameritrade Brokerage Account.
LEVOFF purchased the Company-i stock at an average price of approximately
$334.47 per share, for a total cost of more than approximately $1 million. At
the time he purchased the Company-i stock, LEVOFF possessed material
nonpublic information regarding Company-i and was subject to the Q2 2011
Blackout Period.

30. On or about April 20, 2011, at approximately 1:30 p.m., Company

i issued a press release disclosing its Q2 2011 financial results to the public.
In the April 20, 2011 press release, Company-i announced that it had posted
record revenue and net profit for Q2 2011. Company-i’s CEO remarked in the
posting that Company-i was “firing on all cylinders.”

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31. Later the same day, LEVOFF sold approximately 3,500 shares of
Company-i stock in the TD Arneritrade Brokerage Account while he was still
subject to the Q2 2011 Blackout Period. LEVOFF sold the Company-i shares
at an average price of approximately $353.85 per share. By virtue of his sales
of Company-i stock on or about April 20, 201i, LEVOFF realized a profit of
approximately $60,000.

32. On or about April 22, 2011, LEVOFF sent an email to individuals

subject to the Q2 2011 Blackout Period notifying them that the blackout period
would end on or about April 25, 2011. LEVOFF told the email recipients they
could resume trading Company-i securities on the specified date and
reiterated Company- i’s prohibition against insider trading. LEVOFF wrote in
the email: “This information is provided to you in an effort to protect you and
[Company-i] from any violations of federal. . securities laws that may result
.

from a failure to comply with those laws.”

LEVOFF Trades Ahead of Company-i’s

Q3 2011 Earnings Announcement

33. The blackout period for Q3 2011 began on or about June 1, 2011
and ended on or about July 22, 2011 (the “Q3 2011 Blackout Period”).

34. On or about May 27, 2011, LEVOFF sent an email to individuals

subject to the Q3 2011 Blackout Period with the subject line, “Commencement
of Trading Blackout June 1, 2011.” LEVOFF was again among the
-

individuals subject to the Q3 2011 Blackout Period. In the email which,

—

except for the dates of the applicable blackout period, was virtually identical to
his February 24, 2011 email LEVOFF notified the recipients that they and
—

their immediate family members were prohibited from trading in Company-i

securities starting on or about June 1, 2011 until sixty hours after Company-i
announced its quarterly earnings in or around July 2011. LEVOFF stated in
the email as he had in his February 24, 2011 email that Company-i’s
—
—

Insider Trading Policy prohibited individuals who possessed or had access to

material nonpublic information regarding Company-i from buying or selling
Company-i stock, regardless of whether a blackout period was in place.

35. On or about July 8, 2011, members and invitees of the Disclosure

Committee, including LEVOFF, received an email attaching draft earnings
materials for Q3 201 1, including a draft press release, financials, and prepared
executive remarks.

36. Several hours later, members and invitees of the Disclosure

Committee, including LEVOFF, received an email attaching Company- l’s draft
Form iO-Q report for Q3 2011. The draft Form iO-Q report contained
information about Company-i ‘s earnings, including revenue and net profit for

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Q3 2011. Soon after receiving this material nonpublic information, LEVOFF

began purchasing Company-i stock.

37. On or about July 11, 2011, at approximately 6:40 a.m., LEVOFF

purchased approximately 850 shares of Company-i stock in the TD Ameritrade
Brokerage Account at an average price of approximately $357.76 per share. At
the time he made the purchases, LEVOFF possessed material nonpublic
information regarding Company-i and was also subject to the Q3 2011
Blackout Period.

38. At approximately 8:00 a.m. the same day, LEVOFF attended a

Disclosure Committee meeting at Company- l’s Cupertino headquarters as an
invitee. During the meeting, the Disclosure Committee members and invitees
reviewed and discussed Company-i’s draft Form 1 0-Q report and draft
earnings materials for Q3 2011.

39. The following day, on or about July 12, 2011, LEVOFF purchased
approximately 860 shares of Company-i stock in the TD Ameritrade Brokerage
Account.

40. On or about July 14, 2011, LEVOFF purchased approximately 600

shares of Company-i stock in the TD Ameritrade Brokerage Account.

41. On or about July 15, 2011, LEVOFF purchased approximately 600

shares of Company-i stock in the TD Ameritrade Brokerage Account.

42. On or about July 18, 2011, LEVOFF purchased approximately 700

shares of Company-i stock in the TD Ameritrade Brokerage Account.

43. On or about July 19, 2011, LEVOFF purchased approximately 326

shares of Company- i stock in the TD Ameritrade Brokerage Account.

44. Between on or about July 11,2011 and on or about July 19, 2011,
LEVOFF purchased approximately 3,936 shares of Company-i stock at average
prices ranging from approximately $354.58 to approximately $374.80 per
share. LEVOFF paid nearly $1.4 million for the Company-i stock. At the time
he purchased the shares, LEVOFF was in possession of material nonpublic
information regarding Company-i and was subject to the Q3 2011 Blackout
Period.

45. On or about July 19, 2011, at approximately 1:30 p.m., Company

1 issued a press release disclosing its Q3 2011 financial results to the public.
The public disclosure announced that Company-i had again posted record
revenue and net profit for Q3 2011. Company- i’s CEO remarked in the July
19, 2011 press release that Company-i was “thrilled to deliver [its] best quarter
ever.”

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46. Later the same day, LEVOFF began selling Company-i securities.
By the time he was finished, LEVOFF had liquidated approximately 3,936
shares of Company-i stock the same number of shares LEVOFF had
-

purchased in the days leading up to Company-i’s July 19, 2011 press release.
LEVOFF sold the 3,936 shares at an average price of approximately $397.88
per share, well above the prices he had paid for an equal number of Company
1 shares days earlier. As a result of his sales of Company-i stock on or about
July 19, 2011 when he was still subject to the Q3 2011 Blackout Period
—
—

LEVOFF realized a profit of approximately $144,000.

47. On or about July 21, 2011, LEVOFF sent an email notifying

individuals subject to the Q3 2011 Blackout Period that the trading restriction
would end on or about July 22, 2011. LEVOFF reminded the recipients that
they were prohibited from trading Company-i stock if they had access to
material nonpublic information regarding Company-i and that such conduct
violated federal securities laws.

LEVOFF Trades Ahead of Company-i’s

Qi 2012 Earnings Announcement

48. The blackout period for Qi 2012 began on or about December 1,

201i and ended on or about January 27, 2012 (the “Qi 2012 Blackout
Period”).

49. On or about November 28, 2011, a Company-i employee sent an

email to individuals subject to the Qi 2012 Blackout Period, including
LEVOFF. The email which had the subject line, “Commencement of Trading
—

Blackout December 1, 201 1” notified the recipients that they and their
— —

immediate family members were prohibited from engaging in any transactions

involving Company-i stock beginning on or about December 1, 2011 and
ending sixty hours after Company-i announced its earnings in or around
January 2012. The email stated that Company-i’s Insider Trading Policy
prohibited individuals who possessed or had access to material nonpublic
information regarding Company-i from buying or selling Company-i stock,
regardless of whether a blackout period was in place.

50. On or about January 13, 2012, members and invitees of the

Disclosure Committee, including LEVOFF, received an email attaching draft
earnings materials for Q 1 2012, including a draft press release, financials, and
prepared executive remarks.

51. Several hours later, members and invitees of the Disclosure

Committee, including LEVOFF, received an email attaching Company- i’s draft
Form iO-Q report for Qi 2012. The draft Form 10-Q report contained
information about Company-i’s earnings, including revenue and net profit for
Qi 2012.
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52. On or about January 16, 2012, the Disclosure Committee met at

Company- l’s headquarters in Cupertino. LEVOFF attended the meeting in
person as a Disclosure Committee invitee. During the meeting, members and
invitees of the Disclosure Committee discussed Company-i’s draft Form 10-Q
report and draft earnings materials for Qi 2012. After the Disclosure
Committee meeting, LEVOFF began purchasing Company-i securities, all in
the TD Ameritrade Brokerage Account.

53. On or about January 20, 2012, LEVOFF purchased approximately

800 shares of Company-i stock at an average price of approximately $423.36
per share.

54. On or about January 23, 2012, LEVOFF purchased

approximately 250 additional shares of Company-i stock at an average price of
approximately $427.50 per share.

55. On or about the morning of January 24, 2012, LEVOFF purchased

another approximately 528 shares of Company-i stock at an average price of
approximately $423.98 per share.

56. Together, LEVOFF paid a total of approximately $669,000 to

acquire approximately 1,578 shares of Company-i stock. At the time of the
purchases, LEVOFF possessed material nonpublic information regarding
Company-i and was subject to the Qi 2012 Blackout Period.

57. On or about January 24, 2012, at approximately 1:30 p.m.,

Company-i issued a press release disclosing its Qi 2012 financial results to
the public. The January 24, 2012 press release heralded Company-i’s record
revenue and net profit for the quarter, which Company-i’s CEO credited to
Company-i’s “record-breaking sales” of Company-i products.

58. Later the same day, LEVOFF began selling shares of Company-i
stock. LEVOFF sold approximately 666 shares of Company-i stock at an
average price of approximately $454.11 per share, well above the prices
LEVOFF had paid days before. By virtue of LEVOFF’s sales on or about
January 24, 2012 which occurred when he was still subject to the Qi 2012
—

Blackout Period LEVOFF realized a profit of approximately $19,000.

—

59. On or about January 26, 2012, a Company-i employee sent an

email to individuals subject to the Qi 2012 Blackout Period, including
LEVOFF, advising them that the trading restriction would end on or about
January 27, 2012. The email went on to reiterate Company-i’s prohibition
against insider trading, regardless of whether a blackout period was in place.

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Case 2:19-cr-00780-WJM Document 1 Filed 02/13/19 Page 14 of 18 PageID: 14

LEVOFF Trades Ahead of Company-i’s

Q3 2015 Earnings Announcement

60. The blackout period for Q3 2015 began on or about June 1, 2015
and ended on or about July 24, 2015 (the “Q3 2015 Blackout Period”).

61. On or about May 26, 2015, Company-i sent an email to

individuals subject to the Q3 2015 Blackout Period, including LEVOFF. The
email notified the recipients that they and their immediate family members
were prohibited from buying or selling Company-i stock beginning on or about
June 1, 2015 until sixty hours after Company-i released its earnings to the
public in or around July 2015. The email stated that Company-i’s Insider
Trading Policy prohibited individuals who possessed or had access to material
nonpublic information regarding Company-i from buying or selling Company-i
stock, regardless of whether a blackout period was in place, and provided an
email address and phone number to contact with questions.

62. On or about July 10, 2015, members and invitees of the Disclosure
Committee, including LEVOFF, received an email attaching draft earnings
materials for Q3 2015, including a draft press release, financials, and prepared
executive remarks.

63. Several hours later, members and invitees of the Disclosure

Committee, including LEVOFF, received an email attaching Company- i’s draft
Form i0-Q report for Q3 2015. The email read: “Each Disclosure Committee
member is required to review the entire Form iO-Q to ensure the Company’s
disclosures are complete and accurate.” Among other things, the attached
draft Form 10- Q contained information about Company-i’s earnings, including
Company-i’s revenue and net profit for Q3 2015.

64. On or about July 13, 2015, the Disclosure Committee met at

Company- l’s headquarters in Cupertino. LEVOFF was one of the two co
chairpersons of the Disclosure Committee and participated in the meeting by
telephone. During the meeting, Disclosure Committee members and invitees
reviewed and discussed Company- i’s draft earnings materials and draft Form
iO-Q report for Q3 2015. After the Disclosure Committee meeting, LEVOFF
began selling Company-i securities.

65. On or about July 17, 2015, LEVOFF sold approximately 43,750

shares of Company-i stock in the TD Ameritrade Brokerage Account at an
average price of approximately $129 per share. Virtu acted as a counterparty
for some of these trades.

66 That same day, LEVOFF sold approximately 8,700 shares of

Company-i stock in the First Republic Account at an average price of

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Case 2:19-cr-00780-WJM Document 1 Filed 02/13/19 Page 15 of 18 PageID: 15

approximately $128.94 per share. BNY Mellon acted as a counterparty for

some of these trades.

67. On or about July 20, 2015, LEVOFF sold approximately 7,000

more shares of Company-i stock in the TD Ameritrade Brokerage Account at
an average price of approximately $131.54 per share. G 1 and Virtu each acted
as counterparties for some of these trades.

68. On or about July 21, 2015, LEVOFF sold approximately 17,678

shares of Company-i stock in the TD Ameritrade Brokerage Account at an
average price of approximately $131.07 per share. Virtu and Two Sigma each
acted as counterparties for some of these trades.

69. From on or about July 17, 2015 through on or about July 21,
2015, LEVOFF sold approximately 77,128 shares of Company-i stock for
approximately $10 million. At the time of the sales, LEVOFF was in possession
of material nonpublic information regarding Company-i and was subject to Q3
2015 Blackout Period.

70. On or about July 21, 2015, at approximately 1:30 p.m. after

—

LEVOFF had sold his final shares of Company-i stock that day Company-i
-

issued a press release disclosing its Q3 2015 financial results to the public.
The July 21, 2015 press release disclosed revenue and profit below what many
analysts had predicted, causing Company- l’s stock price to decline by nearly
4.2 percent by the close of trading the following day.

71. As a result of LEVOFF’s sale of approximately 77,128 shares of

Company-i stock ahead of Company-i’s July 21, 2015 press release when he
—

was still subject to the Q3 2015 Blackout Period LEVOFF avoided a loss of
—

approximately $345,000.

72. On or about July 23, 2015, Company-i sent an email to

individuals subject to the Q3 2015 Blackout Period, including LEVOFF, stating
that the trading restriction would end the following day, on or about July 24,
2015.

LEVOFF Trades Ahead of Company-i’s

Q4 2015 Earnings Announcement

73. The blackout period for Q4 2015 began on or about September 1,

2015 and ended on or about October 29, 2015 (the “Q4 2015 Blackout Period”).

74. On or about August 27, 2015, Company-i sent an email to

individuals subject to the Q4 2015 Blackout Period, including LEVOFF, with
the subject line, “Commencement of Trading Blackout Tuesday, September 1,
—

2015.” The email notified the recipients that they and their immediate family

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members were prohibited from buying or selling Company-i stock beginning on

or about September 1, 2015 until sixty hours after Company-i released its
earnings to the public in or around October 2015. The email stated that
Company-i’s Insider Trading Policy prohibited individuals who possessed or
had access to material nonpublic information regarding Company-i from
buying or selling Company-i stock, regardless of whether a blackout period
was in place, and provided an email address and phone number to contact
with questions.

75. On or about October 12, 2015, members and invitees of the

Disclosure Committee, including LEVOFF, received an email attaching
Company-i’s draft Form 10-K report for financial year 2015. The email stated
that Disclosure Committee members were required to review “the entire Form
10-K” to ensure the disclosures it contained were complete and accurate.
Among other things, the draft Form 10-K contained information about
Company- i’s earnings, including revenue and net profit for financial year
2015.

76. On or about October 13, 2015, members and invitees of the

Disclosure Committee, including LEVOFF, received an email attaching draft
earnings materials for Q4 20i5, including a draft press release, financials, and
prepared executive remarks.

77. On or about October 15, 2015, Disclosure Committee members

and invitees met at Company- i’s headquarters in Cupertino to discuss the
draft Form 10-K report. LEVOFF did not attend the meeting or participate by
telephone.

78. On or about October 26, 2015, LEVOFF purchased approximately

iO,000 shares of Company-i stock in the TD Ameritrade Brokerage Account at
an average price of approximately $115.70 per share for a cost of
approximately $1.15 million. At the time he purchased the Company- i
securities, LEVOFF possessed material nonpublic information regarding
Company-i and was subject to the Q4 2015 Blackout Period. Two Sigma acted
as a counterparty for some of these trades.

79. On or about the morning of October 27, 2015, Company-i sent an

email to individuals subject to the Q4 20i5 Blackout Period, including
LEVOFF, informing them that they could resume trading Company-i securities
on or about October 29, 2015. (Company-i’s September 2015 Insider Trading
Policy reduced the waiting period from sixty hours after Company-i disclosed
earnings to twenty-four hours.) The email also reiterated Company- i’s
standard prohibition against trading on material nonpublic information.

80. At approximately 1:30 p.m. that afternoon, Company-i issued a

press release disclosing its Q4 2015 financial results to the public. In the

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October 27, 2015 press release, Company-i announced that Company-i had
posted record fourth quarter results, and Company-i’s CEO remarked in the
disclosure that “Fiscal 2015 was [Company-i’sJ most successful year ever.”

81. On or about October 28, 2015 before the Q4 2015 Blackout

—

Period had terminated LEVOFF sold approximately 12,174 shares of

—

Company-i stock in the TD Ameritrade Brokerage Account at an average price

of approximately $116.20 per share, for a profit of approximately $4,700.

LEVOFF Trades Ahead of Company-i’s

Q2 2016 Earnings Announcement

82. The blackout period for Q2 2016 began on or about March 1, 2016
and ended on or about April 28, 2016 (the “Q2 2016 Blackout Period”).

83. On or about february 25, 2016, Company-i sent an email to

individuals subject to the Q2 2016 Blackout Period, including LEVOFF. The
email which had the subject line, “Commencement of Trading Blackout
—
—

Tuesday, March 1, 2016” notified the recipients that they and their
—

immediate family members were prohibited from engaging in any transactions

involving Company-i stock beginning on that date until twenty-four hours
after Company released its earnings in or around April 2016. The email stated
that Company- i’s Insider Trading Policy prohibited individuals who possessed
or had access to material nonpublic information regarding Company-i from
buying or selling Company-i stock, regardless of whether a blackout period
was in place, and provided an email address and phone number to contact
with questions.

84. On or about April 8, 2016, members and invitees of the Disclosure

Committee, including LEVOFF, received an email attaching Company-i’s draft
Form 10-Q report for Q2 2016. The draft Form iO-Q contained information
about Company- l’s earnings, including revenue and net profit for Q2 2016.

85. On or about April 15, 2016, members and invitees of the

Disclosure Committee, including LEVOFF, received an email attaching draft
earnings materials for Q2 2016, including a draft press release, financials, and
prepared executive remarks.

86. Later the same day, the Disclosure Committee met at Company-i’s
headquarters in Cupertino. LEVOFF, as one of the Disclosure Committee’s co
chairpersons, attended the meeting in person. During the meeting, the
Disclosure Committee reviewed and discussed Company-i’s draft earnings
materials for Q2 2016.

87. On or about April 21, 2016, LEVOFf sold approximately 4,009

shares of Company-i stock in the TD Ameritrade Brokerage Account at an

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Case 2:19-cr-00780-WJM Document 1 Filed 02/13/19 Page 18 of 18 PageID: 18

average price of approximately $105.87 per share. At the time, LEVOFF

possessed material nonpublic information regarding Company-i and was
subject to the Q2 2016 Blackout Period. 01 acted as a counterparty for some
of these trades.

88. On or about April 26, 2016, at approximately 1:30 p.m., Company-

1 issued a press release disclosing its Q2 2016 financial results to the public.
Company-i announced in the April 26, 2016 press release that its revenue and
net profit were each down compared to Q2 2015. Company-i’s CEO remarked
in the press release that Company-i’s team had “executed extremely well in the
face of strong macroeconomic headwinds.” By the close of trading the following
day, Company- l’s stock price had fallen approximately 6.2 percent.

89. By virtue of his sales of Company-i stock on or about April 21,

2016 while he possessed material nonpublic information regarding Company
—

l’s earnings LEVOFF avoided a loss of approximately $32,000.

—

90. On or about April 27, 2016, Company-i sent an email to

individuals subject to the Q2 2016 Blackout Period, including LEVOFF. The
email announced that the recipients could resume trading Company-i
securities on or about April 28, 2016.

16