Case 2:19-cr-00780-WJM Document 16 Filed 10/24/19 Page 1 of 13 PageID: 51

USA02017R00679/CAH/DVS

FILED
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
OCT 2019_
AT flh
UNITED STATES OF AMERICA Hon. WIUJJXWAtSH

Criminal No. i-C ?fo

15 U.S.C. § 78j(b) and 78ff
17 C.F.R. § 240. lOb-S and 240.10b5-2
GENE LEVOFF : 18 U.S.C. § 1343 and 2

INDICTMENT

The Grand Jury in and for the District of New Jersey, sitting at

Newark, charges:

COUNTS ONE THROUGH SIX

(Securities Fraud)

Relevant Individuals and Entities

1. At all times relevant to this Indictment:

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.

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 20i3 through September

2018, LEVOFF was the Senior Director of Corporate Law at Company-i. In

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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 2018, Company-i named LEVOFF its Corporate Secretary, a title he

maintained until September 2018. Before that, LEVOFF held the role of

Assistant Secretary.

c. LEVOFF’s responsibilities included ensuring

compliance with Company-i’s Insider Trading Policy. Company-i’s Insider

Trading Policy prohibited the unauthorized disclosure of any nonpublic

information acquired in the work place and the misuse of material nonpublic

information in securities trading (“Company-i’s Insider Trading Policy”).

d. From in or around September 2008 through in or

around July 2018, LEVOFF served on Company-i’s Disclosure Committee,

and, as a result, had access to and obtained Company-l’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. As a Disclosure Committee member and high-ranking

Company-i employee, LEVOFF owed a fiduciar duty to Company-i and its

shareholders to protect the material nonpublic information regarding

Company-i to which he had access. LEVOFF further owed Company-l and its

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shareholders a duty not to use such material nonpublic information for his

own personal benefit. Additionally, LEVOFF was subject to certain company-

imposed “blackout periods” that prohibited him and others like him with

access to material nonpublic information regarding Company-i from engaging

in trades involving Company- 1 stock.

e. 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-l

stock.

f. 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- 1 stock.

g. 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 New Jersey.

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h. Susquehanna International Group, f/k/a G1

Execution Services, LLC (“01”) was a market maker. The servers that housed

Gi’s electronic trading systems and executed trades involving those systems

were located in New Jersey.

i. 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 New Jersey.

j. 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 New Jersey.

The Insider Trading Scheme

2. Prom 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- 1.

Goal of the Scheme

3. The goal of the insider trading scheme was for LEVOFF to

enrich himself by obtaining money and avoiding losses by purchasing and

selling Company-i securities on the basis of material nonpublic information

regarding Company-i gained by LEVOFF through his position at Company-i.

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Manner and Means of the Insider Trading Scheme

4. The manner and means by which LEVOFF accomplished the

goal of the insider trading scheme included:

a. LEVOFF used his position on 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.

b. LEVOFF converted the material nonpublic information

to his own use by executing trades involving Company-i stock in the TD

Ameritrade Brokerage Account and the First Republic Account before

Company-i disclosed its financial results to the public. When LEVOFF’

discovered that Company- 1 had strong revenue and net profit for a given

financial quarter, he purchased large quantities of Company-i stock, which he

later sold for a profit after Company-i disclosed the positive earnings

information to the public and the market reacted to the news. Conversely,

when LEVOFF’ learned that Company- 1 had lower-than-anticipated revenue

and net profit, he sold large quantities of Company-i stock, thus avoiding the

significant losses that would occur after Company-i disclosed the information

to the public and the market reacted to the negative news regarding Company

l’s earnings.

c. LEVOFF executed, and caused to be executed, a

number of trades, referenced herein, with market maker counterparties whose

electronic trading systems or servers were located in the District of New Jersey,

namely, Virtu, Cii, BNY Mellon, and Two Sigma.

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d. LEVOFF executed the favorable trades involving

Company-i stock in violation of Company-i’s Insider Trading Policy and during

Company-i black out periods.

e. LEVOFF executed trades in furtherance of the scheme

from at least as early as April of 2011 through at least as late as April of 2016,

realizing profits of approximately $227,000 and avoiding losses of

approximately $377,000.

5. On or about the dates set forth below, in the District of New

Jersey and elsewhere, the defendant,

GENE LEVOFF,

did willfully, arid knowingly, directly and indirectly, by use of the means and

instrumentalities of interstate commerce, and of the mails and the facilities of

national securities exchanges, use and employ, in connection with the

purchase and sale of securities, manipulative and deceptive devices and

contrivances, in violation of Title 17, Code of Federal Regulations, Section

240. lob-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 transactions in the securities of Company- 1 on the basis of

material nonpublic information concerning Company-i in breach of a duty of

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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, each such

transaction constituting a separate count of this Indictment.

COUNT APPROXIMATE SECURJTJES TRANSACTION

DATE

One July 17, 2015 Sale of approximately 43,750 shares of

Company-i stock by LEVOFF. Virtu acted as
counterparty to some of these trades.

Two July 17, 2015 Sale of approximately 8,700 shares of

Company-i stock by LEVOFF. BNY Mellon
acted as counterparty to some of these
trades.

Three July 20, 2015 Sale of approximately 7,000 shares of

Company-i stock by LEVOFF. 01 and Virtu
acted as counterparties to some of these
trades.

Four July 21, 2015 Sale of approximately 17,678 shares of

Company-i stock by LEVOFF. Virtu and Two
Sigma acted as counterparties to some of
these trades.

Five October 26, 2015 Purchase of approximately 10,000 shares of

Company-i stock by LEVOFF. Two Sigma
acted as a counterparty for some of these
trades.

Six April 2 i, 2016 Sale of approximately 4,009 shares of

Company-i stock by LEVOFF. 01 acted as a
counterparty for some of these trades.

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In violation of Title 15, United States Code, Sections 78j(b) and

78ff, Title 17, Code of Federal Regulations, Section 240.lOb-5 and 240.10b5-2,

and Title 18, United States Code, Section 2.

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COUNTS SEVEN THROUGH TWELVE

(Wire Fraud)

1. The allegations contained in paragraphs 1, 2, and 4 of Count

One are incorporated as if fully set forth herein.

2. On or about the dates set forth below, in the District of New

Jersey and elsewhere, having devised and intending to devise a scheme and

artifice to defraud and to obtain money and property by means of materially

false and fraudulent pretenses, representations and promises, the defendant,

GENE LEVOFF,

did, for the purpose of executing and attempting to execute the scheme and

artifice, knowingly and intentionafly cause to be transmitted by means of wire,

radio, or television communications in interstate and foreign commerce, the

following writings, signs, signals, pictures, and sounds, to wit, LEVOFF

schemed to defraud Company-i of confidential information related to

Company-i’s financial results through deceptive means and then converted

that information to his own use, through wire transmissions, for the purpose of

executing securities transactions in Company-i stock.

COUNT APPROXIMATE WIRE COMMUNICATION

DATE

Seven July 17, 2015 Sale of approximately 5,000 shares of

Company-i stock by LEVOFF, resulting in
interstate wire transmissions with Virtu.

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Eight July 20, 2015 Sale of approximately 2,000 shares of

Company-i stock by LEVOFP, resulting in
interstate wire transmissions with 01.

Nine July 20, 2015 Sale of approximately 5,000 shares of

Company-i stock by LEVOFF, resulting in
interstate wire with Virtu.
transmissions

Ten July 21, 2015 Sale of approximately 2,000 shares of

Company-i stock by LEVOFF, resulting in
interstate wire transmissions with Virtu.

Eleven October 26, 2015 Purchase of approximately 10,000 shares of

Company-i stock by LEVOFF, resulting in
interstate wire transmissions with Two
Sigma.

Twelve April 21, 2016 Sale of approximately 4,009 shares of

Company-i stock by LEVOFF, resulting in
interstate wire transmissions with Ci.

In violation of Title 18, United States Code, Sections 1343 and 2.

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FORFEITURE ALLEGATIONS

1. As the result of committing the offenses constituting

specified unlawful activity as defined in 18 U.S.C. § 1956(c)(7), as alleged in

counts One through Seven, inclusive, of this Indictment, defendant GENE

LEVOFF shall forfeit to the United States, pursuant to Title 18, United States

code, Section 981(a)(l)(C), and Title 28, United States code, Section 2461(c),

all property, real and personal, that constitutes or is derived from proceeds

traceable to the commission of the conspiracy and securities fraud offenses,

and all property traceable thereto.

SUBSTITUTE ASSETS PROVISION

2. If any of the above-described forfeitable property, as a result

of any act or omission of the defendant:

a. Cannot be located upon the exercise of due diligence;

b. Has been transferred or sold to, or deposited with, a

third person;

c. Has been place beyond the jurisdiction of the Court;

d. Has been substantially diminished in value; or

e. Has been commingled with other property which

cannot be subdivided without difficulty;

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It is the intent of the United States, pursuant to 21 U.S.C. § 853(p), as

incorporated by 28 U.S.C. § 2461(c), to seek forfeiture of any other property of
the defendant up to the value of the above forfeitable property.

A TRUE BILL

Grand Jury rorepeisuii

£Lo Cjt0
CRAIG CA’EtPENITb
UNITED STATES ATTORNEY

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 CASE NUMBER: /? ?
United States District Court
District of New Jersey
UNITED STATES OF AMERICA

‘7.

GENE LEVOFF

INDICTMENT FOR
15 U.S.C. § 78j(b) and 78ff
17 C.F.R. § 240. lOb-5 and 240. 10b5-2
18 U.S.C. § 1343 and 2

‘I •T’—. flflt

roreperson

CIIG CARPENITO
UNITED STATES ATTORNEY
FOR THE DISTRICT OF NEW JERSEY

COURTNEY A. HOWARD
DANIEL V. SHAPIRO
ASSISTANT U.S. ATTORNEYS
NEWARK, NEW JERSEY
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