Another Defendant Added in Mobileye Insider Trade Case
The SEC has filed a claim against Jerusalem resident James Shaoul, the brother of previously charged Richmond, Virginia resident Roger E. Shaoul
The previous complaint, filed April 5 in a New York Southern District Court, named Richmond, Virginia residents and business partners Lawrence F. Cluff Jr. and Roger E. Shaoul as defendants. The SEC then alleged that the two, relying on insider trading information, bought large positions in Mobileye securities shortly before Intel announced its acquisition of Mobileye for $15.3 billion on March 13. The announcement sent Mobileye’s share price up by 28% by the close of trading that day, netting the partners combined profits of over $925,000.
According to the complaint, Roger Shaoul received the information from his brother, James Shaoul, a cosmetic physician living in Jerusalem where Mobileye's offices are located. Dr. Shaoul has "professional and personal relationships with Mobileye insiders, including the founders of Mobileye who directly participated in the negotiations that resulted in the tender offer."
Dr. Shaoul is one of only 35 investors in OrCam Technologies Ltd., a company founded jointly by Mobileye co-founders Amnon Shashua and Ziv Aviram in 2010, his children are friends with the children of the two founders, and Mr. Shashua and his wife were patients of his. In December 2016, Dr. Shaoul and his wife also joined a privately chartered flight to Germany and Spain for Mobileye executives following a private invitation.
The non-disclosure agreement between Intel and Mobileye's founders Messrs. Shashua and Aviram, referred to as "Director A" and "Director B" in the lawsuit respectively, was signed on February 1 after formal negotiations between the companies began in late January.
Mr. Cluff opened a new trading account on January 29 for the purpose of trading in Mobileye shares after Roger Shaoul told him his "family knew the principals of Mobileye and that the principals of Mobileye recommended that all their friends and family invest in Mobileye."
According to the claim, "James Shaoul knew or was reckless in not knowing that the information tipped by Directors A and/or B was material and nonpublic," given his close and long term relationship with the two; the information he gave to his brother included "a price per share discussed in confidential discussions between Mobileye and Intel, as well as an estimated date range for Announcement".
The SEC asked in the lawsuit that all three defendants pay penalties and be permanently barred from future violations and that Messrs. Shaoul and Cluff "disgorge, with interest, all illicit trading profits or other ill-gotten gains". The assets of the two have been frozen since May.
These charges are related to a case filed in March in which the SEC charged two Israeli citizens with insider trading related to the deal. The two are Ariel Darvasi, Vice Dean of the Faculty of Science at the Hebrew University of Jerusalem, and Amir Waldman, former vice president of Israel-based medical device company Syneron Medical Ltd.
The case against Mr. Darvasi's was closed in July due to his ill health when he agreed to pay a fine of $854 thousand—twice the profit he made—in exchange for not admitting guilt. The case against Mr. Waldman is still ongoing.
Mr. Shashua did not comment.
Mobileye commented: "the company does not respond on SEC proceedings."
Dr. Shaoul did not comment.
The SEC does not comment on pending litigation.