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A former managing director of the NASDAQ stock exchange has been sentenced to 42 months in prison and has been ordered to forfeit over $700,000 he illegally made in profits for his role in an insider trading scheme.
Mr Donald Johnson, 57, had pleaded guilty in May this year to one count of securities fraud, admitting that from 2006 to 2009, he purchased and sold stock in NASDAQ-listed companies based on material, non-public information and inside information he obtained through his position as an executive at NASDAQ.
He was sentenced by the US District Judge, Mr Anthony Trenga, in the Eastern District of Virginia.
“Johnson’s insider status at one of our nation’s largest securities exchanges gave him access to highly sensitive information, which allowed him to anticipate the rise and fall of certain stocks,” said Assistant Attorney General, Mr Lanny Breuer.
“Armed with this insider information... Johnson pocketed hundreds of thousands of dollars. But he did it by exploiting his trusted position to gain an unfair — and illegal — advantage in the market.’’
Mr Johnson made $755,066 in illicit profits through inside information he had on various companies and has been ordered to forfeit the amount.
According to court documents, Mr Johnson was the Managing Director on NASDAQ’s market intelligence desk in New York from August 2006 to September 2009.
The desk provides trading analysis and market information to companies that list on NASDAQ.
Mr Johnson admitted that he repeatedly used company information related to earnings announcements and regulatory approvals to purchase or sell short stock in various NASDAQ-listed firms shortly before the information was made public.
In order to conceal his illegal trading, he executed these trades in a brokerage account in his wife’s name, which he failed to disclose to NASDAQ in violation of its rules.
Mr Johnson admitted in his plea that he made illegal purchases and sales of stock in NASDAQ-listed companies on at least eight different occasions.
The Securities and Exchange Commission has filed a related civil enforcement action against Mr Johnson in New York.
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