Farmingdale Man Admits Role In $3.9M Illegal Trading Scheme

TRENTON, NJ -- Two day traders, including a Farmingdale man, admitted participating in a multi-year insider trading scheme that made more than $3.9 million in illicit profits by exploiting material information in violation of confidentiality agreements, U.S. Attorney Paul J. Fishman announced.

Steven Costantin, 55, of Farmingdale, and Ronald Chernin, 67, of Oak Park, Calif., pleaded guilty before U.S. District Judge Michael A. Shipp in Trenton federal court to one count each of of conspiracy to commit securities fraud and of securiies fraud.

According to documents filed in the case and statements made in court:

Chernin and Costantin worked as day traders for Costantin’s brother-in-law, Steven Fishoff, 58, of Westlake Village, Calif. Between May 2010 and August 2013, Chernin, Costantin, and Fishoff, as well as a business associate referred to as “Trader A,” expressed interest in participating in numerous stocks offerings by publicly traded companies.

Fishoff has been indicted on charges accusing him of involvement in the insider trading scheme but his case has not yet been resolved. The charges and allegations contained in the indictment are merely accusations, and Fishoff is presumed innocent unless and until proven guilty.

Chernin, Costantin, and other members of the day trading operation falsely characterized their trading entities as legitimate, full-service financial management firms with as much as $150 million in assets under management, in order to increase the likelihood that the investment bankers would solicit them to participate in the stock offerings.

Before providing confidential information concerning the companies or the terms of the proposed sales, the investment bankers first required that Chernin and Costantin, and allegedly Fishoff, Trader A, and their associated trading entities, enter into confidentiality or “wall-crossing” agreements whereby they agreed not to disclose or trade on the inside information and were brought “over the wall” for the narrow purpose of determining whether to purchase the offered securities.

Instead, Chernin, Costantin, and allegedly Fishoff violated the confidentiality agreements by directly or indirectly tipping each other and others with the inside information concerning the stock offerings; short selling the issuers’ stock in anticipation of a drop in price when the stock offerings were disclosed to the public; and covering their short positions once the stock offerings were disclosed. Additionally, Fishoff is accused of tipping off his friend, Paul Petrello, 54, of Boca Raton, Fla., and another friend identified in the documents as “CC-1.”

Petrello previously pleaded guilty to his role in the scheme and is scheduled for sentencing on May 25.

By trading on the nonpublic information, Chernin, Costantin, and their conspirators gained more than $3.9 million in illicit profits over the course of the three-year scheme. Chernin and Costantin allegedly shared 50 percent of their profits with Fishoff.

The conspiracy count to which Chernin and Costantin each pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine. The securities fraud count carries a maximum potential penalty of 20 years in prison and a $5 million fine. Chernin and Costantin are both scheduled for sentencing on July 7.