Securities Regulation Daily Wrap Up, ENFORCEMENT—D. Mass.: SEC, DOJ bring charges against wide-ranging insider trading ring, (May 7, 2026)
Law Firms Mentioned:U.S. v. Fejal and U.S. v. Nourafchan
Organizations Mentioned:Box Options Exchange, LLC | Fairbairn Bruce
The case is significant because the SEC and DOJ allege that the persons at the top of the tipping chain were gatekeepers who worked as lawyers for multiple global law firms handling M&A deals.
The SEC and the DOJ filed multiple count civil and criminal cases against 21 individuals, including multiple attorneys serving as gatekeepers of material nonpublic information (MNPI) regarding pending mergers, acquisitions, and tender offers. The tenor of both the civil and criminal charges is insider trading based on the misappropriation theory of insider trading. The SEC seeks permanent injunctive relief, disgorgement, and civil monetary penalties, while the DOJ seeks general and money-laundering-related forfeitures in addition to other penalties. The DOJ said 19 of the criminal defendants had been arrested and that two criminal defendants located in Russia and Israel are considered to be fugitives (SEC v Nourafchan, No. 1:26-cv-12068-PBS (D. Mass. May 6, 2026); U.S. v. Fejal, No. 1:26-cr-10133-LTS (D. Mass. Apr. 28, 2026); U.S. v. Nourafchan, No. 1:26-cr-10115-LTS (D. Mass. Apr. 28, 2026)).
“Today’s action highlights the SEC’s unwavering commitment to uncovering sprawling schemes, like the one alleged here, and holding individuals up and down the tipping chain accountable for their fraudulent conduct,” said Joseph G. Sansone, Chief of the Division of Enforcement’s Market Abuse Unit.
Prosecutors emphasized the gate keeping function that attorneys in business deals must uphold. “The trading on unannounced financial news alleged here not only violated the securities laws, but it also took advantage of the special access and ethical duties that come with a law license,” said U.S. Attorney Leah B. Foley.
Extensive tipping network. The SEC’s complaint alleged that three attorneys licensed to practice law in New York, of whom two worked at several of four major business law firms based in New York City, Boston, and Los Angeles (the DOJ’s indictments noted additional victim law firms) sat at the pinnacle of an extensive tipping chain.
The three attorneys alleged to be at the top of the tipping chain, said the SEC, knew each other from college. Moreover, the SEC said that from the top of the chain down to the lower levels, multiple defendants were related as siblings or by marriage. The SEC said other of the defendants were service providers (e.g., a hair stylist), co-workers, or friends. The SEC said that some of the tippees kicked back portions of their profits to those who had tipped them.
The SEC’s theory of the case is that several of the defendants misappropriated MNPI from their law firm employers and then tipped others to pending business transactions. According to the SEC’s complaint, many of the defendants took long positions in target companies through the purchase or sale of those companies’ common stock or related call options.
Civil and criminal charges. The SEC civilly charged all 21 defendants with violations related to Exchange Act Section 10(b) and Rule 10b-5, the agency’s workhorse antifraud provisions. The SEC also charged a subset consisting of 8 of the defendants with fraud related to tender offers under Exchange Act Section 14(e) and Rule 14e-3.
The DOJ’s twin indictments charged all 21 of the individuals that were charged criminally by prosecutors with multiple counts of securities fraud conspiracy, securities fraud and related aiding and abetting, money laundering, and general and money laundering-related forfeiture allegations. That indictment also charged a subset of the defendants with making false statements and one defendant with obstruction of justice.
The second indictment brought similar criminal charges against a subset of 5 defendants, while further subsets of whom also were charged with making false statements, obstruction of justice, or making a false declaration before a grand jury.
Note on venue. The SEC filed its civil enforcement case in the federal court in Boston. Readers of the complaint may wonder why Boston instead of New York City where, historically, many, although not all, insider trading cases tend to be filed in the U.S. District Court for the Southern District of New York.
The SEC’s complaint, filed in the U.S. District Court for the District of Massachusetts, suggested an answer to that question. According to the SEC, Nourafchan obtained some of the tipped information from his law firm employer’s Massachusetts-based computer server. The SEC also alleged that some of the civil defendants bought or sold call options via the Massachusetts-based BOX Options Exchange.
The criminal indictments brought by the DOJ likewise tended to rely on at least one of the defendants having accessed MNPI stored on a computer server in Massachusetts that belonged to at least one of the law firms for whom that individual worked.
Remedies sought. The SEC’s complaint seeks a permanent obey-the-law injunction against all of the charged defendants regarding Exchange Act Section 10(b) and Rule 10b-5. Separately, the SEC seeks a similar injunction against eight of the defendants regarding Exchange Act Section 14(e) and Rule 14e-3 (tender offers). From all of the defendants, the SEC seeks disgorgement and civil money penalties.
The cases are No. 1:26-cv-12068-PBS (civil); No. 1:26-cr-10133-LTS (criminal indictment No.1); and No. 1:26-cr-10115-LTS (criminal indictment No.2).
Attorneys: Rua M. Kelly for the SEC. Ian J. Stearns, U.S. Attorney's Office, for the U.S. (U.S. v. Fejal and U.S. v. Nourafchan)
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