David Pajčin
| Industry | Sporting goods |
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The Reebok insider trading scandal involved a series of illicit trades carried out between 2004 and 2005, based on confidential information sourced from a Merrill Lynch investment banker, a grand juror, and advance Business Week publications. These transactions, conducted across the United States and Europe, were mainly coordinated by David Pajčin, a former trader at Goldman Sachs. The Securities and Exchange Commission (SEC) later imposed nearly $28 million in penalties and judgments against him.
Background
David Pajčin, originally from Croatia, became acquainted with Eugene Plotkin during their tenure at the investment firm Goldman Sachs. In 2004, Plotkin facilitated an introduction between Pajčin and Stanislav Shpigelman, an investment banker at Merrill Lynch, at a Russian day spa located in Manhattan. Pajčin also maintained connections with Jason Smith, a postal employee from his high school days, and was romantically involved with Monika Vujovic, an exotic dancer and Croatian immigrant.
Schemes
Stanislav Shpigelman provided Pajčin and Plotkin with insider information regarding mergers and acquisitions in return for financial compensation. The most lucrative trades stemmed from a tip about Adidas-Salomon AG’s acquisition of Reebok.
Additionally, Pajčin capitalized on confidential intelligence obtained from Jason Smith, who was serving on a grand jury, as well as from early copies of Business Week magazines supplied by warehouse employees Nickolaus Shuster and Juan Renteria. Both Shuster and Renteria received payments from Pajčin and Plotkin.
Trades were executed through accounts held by Pajčin himself, his aunt Sonja Antičević, and his girlfriend Monika Vujovic. Numerous other participants—predominantly Croatian nationals—engaged in trading activities based on insider information relayed by Pajčin and Plotkin.
Investigation
The SEC initiated an inquiry into Pajčin after detecting unusual trading patterns and significantly increased volume preceding the announcement of Reebok’s acquisition by Adidas-Salomon AG. Notably, Sonja Antičević, Pajčin’s 63-year-old aunt residing in Croatia on a modest pension and retired from tailoring, purchased $130,000 worth of Reebok call options two days before the deal was publicized, resulting in profits exceeding $2 million. She later professed ignorance regarding stock trading practices.
In the two days leading up to the merger announcement, 8,675 Reebok options were traded—exceeding normal volume by more than fifty times. The SEC discovered that several accounts involved had engaged in similar suspicious transactions in previous months; these included accounts associated with Monika Vujovic and other Croatian individuals. Following these findings, Pajčin was detained and began cooperating with federal prosecutors.
Aftermath and sentencing
Following his 2005 arrest, Pajčin’s cooperation with authorities facilitated the apprehension of all other conspirators by 2006. After entering a guilty plea in 2008, he received a sentence equivalent to time served. However, shortly after release, he violated probation conditions by fleeing the United States, leading to an arrest warrant issued in April 2008. In 2010, he was ordered to pay $7.7 million as a default judgment along with $20.8 million in SEC penalties.
- Eugene Plotkin admitted guilt to conspiracy and insider trading charges; sentenced in 2008 to 57 months imprisonment plus a $10,000 fine.
- Stanislav Shpigelman pleaded guilty to conspiracy and insider trading; received a 37-month prison sentence in 2007.
- Jason Smith pleaded guilty to felony criminal contempt; sentenced to 33 months imprisonment and fined $6,000 in 2006.
- Nickolaus Shuster admitted guilt to conspiracy and insider trading; sentenced to time served in 2008.
- Juan Renteria pleaded guilty to conspiracy and insider trading; received two years probation starting in 2008.
External links
- New York Magazine[1], White Men with Money, The Conclusion of Eugene's Story
- [2] American Greed Episode 22: Uncovering a Fraud: Strippers and Insider Trading