Post-it note eating insider trader pleads guilty

post it note
Who's hungry? Insider trader ate his Post-it notes after passing stock tips.

The middleman in a $5.6 million insider trading scheme has admitted to passing stock tips on Post-it notes and then eating the evidence.

Frank Tamayo, a 41-year-old Brooklyn man, surrendered Friday morning to the Federal Bureau of Investigation and pleaded guilty in Federal Court in New Jersey.

Prosecutors say Tamayo received information about upcoming corporate deals from Steven Metro, the head clerk at a corporate law firm in New York.

Tamayo then handed that information over to Vladimir Eydelman, a stock broker at Oppenheimer (OPY) and Morgan Stanley (MS). Eydelman in turn used it to trade stocks for Tamayo and other customers.

Metro and Eydelman were charged separately in March.

The Securities and Exchange Commission has filed civil charges against all three men.

In an awkward attempt to be stealthy, Tamayo would write a stock ticker on a piece of paper, usually a Post-it note or a napkin, which he would show to Eydelman, indicating that the stock was a buy.

Tamayo would then put the paper in his mouth "and chewed it until it was destroyed," according to prosecutors.

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The information exchange between Tamayo, a mortgage broker, and Eydelman would take place at locations near his office, including a spot near the clock in New York City's Grand Central Station and a midtown coffee shop.

"Tamayo was the firewall between Metro and Eydelman," said Robert Cohen, an official with the Securities and Exchange Commission. "Metro had the information, Eydelman did the trading, and Tamayo kept them apart."

The scheme started in 2009, when Metro met Tamayo at a bar in New York City and started talking stocks over drinks. According to the SEC, Metro told Tamayo about a $500 million investment Liberty Media planned to make in SiriusXM, which prompted Tamayo to call Eydelman.

Over the next five years, Metro divulged information on at least 13 different deals that his firm, Simpson Thacher & Bartlett LLP, was working on, including mergers and acquisitions.

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Metro found potential inside tips by searching his firm's data base for keywords such as "merger agreement," "bid letter," "engagement letter," and "due diligence."

Eydelman also took steps to cover his tracks. The stock broker would send emails to Tamayo outlining his thoughts on why he recommended buying a particular stock. By sending emails that seemed part of his job and innocuous, prosecutors said, he hoped to leave a paper trail that created the appearance that the trade was based on legitimate research and not inside information.

Tamayo's attorney did not immediately respond to a request for comment.

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