This page has been archived and commenting is disabled.

Another Delta One Casualty: Former Goldman ETF Trader Caught In Insider Trading Bust

Submitted by Tyler Durden on 09/21/2011 14:04 -0400

Just because the correlation trading known as Delta One has not had enough bad publicity, not to mention the firm known as Goldman Sachs, here comes another intersection of the two circles in the most recent Venn Diagram...

Just released from the SEC:

The Securities and Exchange Commission today charged a former Goldman, Sachs & Co. employee and his father with insider trading on confidential information about Goldman’s trading strategies and intentions that he learned while working on the firm’s exchange-traded funds (ETF) desk.

The SEC’s Division of Enforcement alleges that Spencer D. Mindlin obtained non-public details about Goldman’s plans to purchase and sell large amounts of securities underlying the SPDR S&P Retail ETF (XRT). He tipped his father Alfred C. Mindlin, a certified public accountant. Father and son then illegally traded in four different securities underlying the XRT with knowledge of massive, market-moving trades in these securities that Goldman would later execute.

The case marks the SEC’s first insider trading enforcement action involving ETFs.

“With his father’s helping hand, Spencer Mindlin exploited his inside knowledge of Goldman’s complex hedging strategies to line his own pockets,” said George S. Canellos, Director of the SEC’s New York Regional Office.

According to the SEC's order instituting proceedings against the Mindlins, the insider trading occurred in December 2007 and March 2008. Goldman was the largest institutional holder of the XRT in order to allow its customers to short the XRT. To hedge its long position in the XRT, Goldman shorted the individual securities underlying the XRT.

The SEC’s Division of Enforcement alleges that by virtue of his position on Goldman’s ETF desk, Spencer Mindlin knew Goldman’s current nonpublic position in the XRT and Goldman’s nonpublic plans to trade large amounts of securities underlying the XRT in order to hedge its position in the XRT. Spencer and Alfred Mindlin began purchasing and selling the four individual securities underlying the XRT within months after Spencer Mindlin joined Goldman’s ETF desk. They placed almost all of their trades in a brokerage account in the name of another family member. Spencer Mindlin failed to disclose his and his father’s trading to Goldman.

According to the SEC’s order, Spencer Mindlin learned on multiple occasions about Goldman’s trading intentions through e-mail communications he received shortly before he and his father placed their trades. In one instance when Alfred Mindlin phoned TD Ameritrade to upgrade the family member’s account to allow for the trading of options, he received a call on another line from Spencer Mindlin while on hold with the TD Ameritrade representative. Because the TD Ameritrade call was recorded, Spencer and Alfred Mindlin’s conversation discussing a trade was captured on tape. In later instances, Spencer Mindlin impersonated his father on at least four calls to TD Ameritrade. On one call, he instructed the firm not to execute a trade too early in the day because this would “chew into my profit – my profit on this trade.” The Mindlins obtained at least $57,000 in illicit profits through their insider trading.

So who is Spencer Midlin, or more specifically, what did he do after leaving Goldman?

Two former Goldman Sachs staffers are working to launch the first equity derivative swap execution facility, called eDeriv. The facility will focus on dealer-to-dealer over-the-counter delta one swaps such as exchange-traded fund swaps and total return index swaps.

Partners Jason Yoon-Hendricks and Spencer Mindlin told Derivatives Week they picked the niche area based out of necessity they saw in the market.

Expect a few more delta one blow ups in 15 minutes...

- advertisements -

Wed, 09/21/2011 - 14:05 | 1693430 Dr. Engali

Rogue traders every where you look.

Wed, 09/21/2011 - 14:13 | 1693470 flacon

Does anybody have a video feed of the FOMC announcement? Thanks!

Wed, 09/21/2011 - 17:18 | 1694526 covert

too bad he got cought, insider trading should be legal.

oh, that's right! it is if your name happens to be:

WARREN BUFFET!

http://covert3.wordpress.com

Wed, 09/21/2011 - 14:07 | 1693431 GeneMarchbanks

Aftermath from the Alpha scandal?

Anyways, 10 minutes before the Bernank they are really airing out the dirty dirty laundry...

Wed, 09/21/2011 - 14:06 | 1693439 BrocilyBeef

silver, you pleasant internet bitchez.

Wed, 09/21/2011 - 14:09 | 1693449 Soul Train

geeez. Great expose. Crooks. No ethics. Just greedy bastards

Wed, 09/21/2011 - 14:10 | 1693450 Hedgetard55

Arrested for a measly $57k? While Bernankecide prints trillions.

Wed, 09/21/2011 - 16:15 | 1694248 Grinder74

Typical SEC. They go balls-to-the-wall against minor alleged "schemes" like this, extracting disgorgment and penalties far in excess of the individual's net worth, and eventually bankrupting (literally) the individual while companies like Goldman that commit mult-million and -billion dollar schemes get away with paying penalties less than 1% of their annual profits. Maybe this is why they are so into midget porn--they only fuck little guys.

Wed, 09/21/2011 - 18:29 | 1694849 ska11153

Could not agree more....your statement is unfortunately very true. Sad state of our government, the SEC and the regulatory environment we are in

Wed, 09/21/2011 - 20:19 | 1695157 Freddie

The examples are almost endless. For example - how about the shitty Chinese scam companies that are such a scam - they cannot get listed in China! The SEC let's them get listed in the US exchanges!!

Wed, 09/21/2011 - 17:15 | 1694505 SokPOTUS

$57K. How in the hell did they ever notice? That's not a rounding error; that's a shadow of a rounding error.

Wed, 09/21/2011 - 14:10 | 1693452 1835jackson

When is enough- enough?

Wed, 09/21/2011 - 14:10 | 1693458 TradingJoe

57K in profits? jesus this is a joke right?

Wed, 09/21/2011 - 14:12 | 1693465 lolmao500

This is such a joke. So many traders do insider trading that it's almost legal.

Hell congress is exempted from insider trading. I mean come on!

Wed, 09/21/2011 - 14:15 | 1693480 Smiddywesson

And just what is wrong with frontrunning the peasants?

Wed, 09/21/2011 - 17:52 | 1694674 Freddie

Buffett and his cronies at Berkshire does this every day. He does it while shitting in his bath water because he cannot hold his feces anymore.

Wed, 09/21/2011 - 16:38 | 1694352 Rick64

Congress also has been passing legislation which they trade off of and profit. This has been happening since the first congress. Check out the war bonds that were going for pennies on the dollar before the first congress passed legislation saying the government would back them of course many members of congress bought them beforehand.

Wed, 09/21/2011 - 21:21 | 1695326 optimator

No joke, it is very serious. All those trading inside info cut into Goldies profits.

Wed, 09/21/2011 - 14:14 | 1693472 OuaisBla

Note that this is a FORMER GS employee who got caught pants short.

Wed, 09/21/2011 - 14:14 | 1693475 GenX Investor

Shocking!

Wed, 09/21/2011 - 14:14 | 1693476 Smiddywesson

$57k?

Kid, you can steal with the Squid, but don't you ever steal from the Squid.

Wed, 09/21/2011 - 17:09 | 1694481 Freddie

LOL! The kid and his CPA old man must feel like the dumbest schmucks from Queens. He worked at Goldman and stole $57K. LOL! What a loser.

He should have given the Squid a cup of coffee like Eric Roberts did in The Pope of Greenwich Village aka Bed Bug Eddie. He gave him a cup of lye/drain cleaner.

The Squid - Lloyd Fischbein or whatever his name is - is the Pope of Greenwich, CT.

Wed, 09/21/2011 - 14:16 | 1693483 WonderDawg

With inside info the best this guy could do was skim 57K? The guy must be criminally retarded. How did he ever get hired at Goldman?

Wed, 09/21/2011 - 17:59 | 1694716 Freddie

His grandfather Morty was probably a good con man for Goldman back in the day. He got his semi-retard grandson a gig at GS. GS lets UBS hire the schwarzters over in London.

The kid and his old man the CPA got on a recorded line with TD Ameritrade discussing their strategy. How f***ing stupid is that?

My guess is they probably thought the order taker at TD was some dumb "goyim." LOL! What idiots. Ameritrade order takers are some times smarter than Goldman c**k s*ckers. I bet the Ameritrade kid on the desk knew options better than these two Bronx low lifes.

Wed, 09/21/2011 - 14:16 | 1693484 LongSoupLine