A former Wells Fargo banker was arrested on Thursday on charges of fraud, conspiracy and money laundering resulting from an insider-trading scheme that netted its participants $11 million, the Justice Department said.
John Femenia, 31, stole non-public information about upcoming mergers from the bank, in exchange for kickbacks from his high school friend, Shawn Hegedus, 32, and Hegedus' girlfriend, Danielle Laurenti, 31, prosecutors said.
Hegedus, Laurenti and six others used the information to trade on, the department said.
Hegedus, who is facing the same charges as Femenia, and Laurenti, who is facing the same charges except for bank fraud, are fugitives, the Justice Department said.
The remaining six defendants, a web of friends and acquaintances, who allegedly obtained the nonpublic information, have all agreed to plead guilty to conspiracy to commit insider-trading.
The criminal charges against Femenia come roughly one week after the U.S. Securities and Exchange Commission filed related civil charges.
A Wells Fargo spokeswoman previously told Reuters that the bank only learned about the SEC's civil charges against Femenia a day before they were filed and immediately placed him on leave.
Femenia worked for Wells Fargo as a banker, first in Charlotte and later in New York City, according to the indictment.
"Mr. Femenia is no longer employed at Wells Fargo and we are continuing to assist the SEC and U.S. Attorney with their actions." a spokeswoman for the bank said on Thursday.
Scott Morvillo, an attorney representing Femenia in the criminal and civil matter, was not immediately available to comment. Attempts to reach Femenia, Hegedus and Laurenti were unsuccessful.
Starting in March 2010, Femenia learned about a pending acquisition through the course of his work. He allegedly called Hegedus, and gave him the details in exchange for payoffs, according to the indictment.
Hegedus and Laurenti also traded on the information using a brokerage account in the name of certain entities they controlled, the indictment alleged. Hegedus also called an acquaintance, who allegedly traded on the information and then again passed the tip on to others.
Femenia is accused of leaking information about four pending mergers, according to the indictment.
Femenia's kickbacks in exchange for the information came in several forms, from gold bars to cash, the department said.
In one instance, prosecutors from the U.S. Attorney for the Western District of North Carolina said Hegedus bought 550 gold bars with proceeds from the trading, while Femenia sold four of them for $70,877 to a precious metals dealer.
In addition, the department accused Hegedus and Laurenti of laundering the insider-trading proceeds through a Las Vegas casino, and it accused Femenia and Hegedus separately of committing mortgage fraud with the purchase of a luxury home in North Carolina.
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