SEC charges accountant in $6.2M insider trading scheme

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A San Diego investment fund owner was arrested and charged with running an insider-trading ring that made more than $6 million from illegal tips about Illumina Inc.

Prosecutors in New York charged Donald Blakstad, 60, with trading on information about the San Diego-based biotechnology company’s earnings and other financial data. In an indictment unsealed Wednesday, the government claimed Blakstad received tips from a former Illumina accountant, Martha Patricia Bustos, 31, who pleaded guilty and is cooperating with the government.

Also involved in the ring was a group of four unidentified co-conspirators, including two executives in a New York investment firm, a California-based owner of an antique watch business and Blakstad’s friend who lives in Florida, according to the indictment. The government claims they traded on tips from Bustos from 2016 to 2018.

Blakstad was expected to appear in federal court in San Diego Wednesday, Manhattan U.S. Attorney Geoffrey Berman said in a statement. He’s charged with five counts of conspiracy, securities fraud and wire fraud. If convicted, Blakstad faces as many as 20 years in prison on the fraud charges.

Blakstad couldn’t be reached for comment. He’s the owner and principal of Midcontinental Petroleum Inc., which invests in the oil and gas industry, according to the government.

Bustos’s lawyer, Peter Till, didn’t immediately return phone and email messages seeking comment.

New York Trip

Blakstad passed the tips from Bustos to others for their own benefit and to help him avoid detection, according to prosecutors. In a related civil case filed on Wednesday, the Securities and Exchange Commission claimed Blakstad “rewarded Bustos lavishly” for the tips, including with an all-expenses-paid 2016 trip to New York.

On the New York trip, Blakstad spent $35,000 to treat Bustos and several of her friends to first-class airfare, hotels and meals, including a $7,500 dinner at Per Se, an upscale restaurant overlooking Central Park in Manhattan.

Bustos, who also lives in San Diego, “traveled, socialized and had a close friendship with Blakstad,” according to the SEC. She pleaded guilty to three criminal counts on June 28, Berman said in the statement. She’s helping the government’s case against her friend in hopes of avoiding prison.

The criminal case is U.S. v. Blakstad, 19-cr-00486, U.S. District Court, Southern District of New York (Manhattan). The SEC case is Securities and Exchange Commission v. Blakstad, 19-cv-06387, U.S. District Court, Southern District of New York (Manhattan).

Bloomberg News
Financial crimes Accounting SEC