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According to the SEC’s complaint, Bechtolsheim misappropriated material nonpublic information regarding the impending acquisition of Acacia Communications, Inc., a manufacturer of highspeed optical interconnect products. The SEC alleges that Bechtolsheim, who was Arista Networks’s chair at the time, learned of Acacia’s impending acquisition on July 8, 2019, through his and Arista Networks’s longstanding relationship with another multinational technology company that was also considering acquiring Acacia and consulted with Bechtolsheim concerning the potential acquisition. Immediately after learning this information, Bechtolsheim allegedly traded Acacia options in the accounts of a close relative and an associate. The next day, July 9, 2019, before the market opened, Acacia and Cisco announced that Cisco had agreed to acquire Acacia for $70 per share. That day, Acacia’s stock price increased by 35.1 percent. According to the SEC’s complaint, Bechtolsheim’s trading generated combined illegal profits of $415,726 in the accounts of his relative and associate. 

“We allege that Bechtolsheim, while serving as the chairman of a publicly traded company, abused the trust of a longtime business contact who had shared highly sensitive information about an imminent corporate acquisition,” said Joseph G. Sansone, Chief of the SEC’s Market Abuse Unit. “We will continue to pursue and prosecute misconduct by trusted insiders at all levels of the corporate hierarchy.”

Without admitting or denying the allegations in the SEC’s complaint, which was filed in the U.S. District Court for the Northern District of California, Bechtolsheim settled the SEC’s charges by agreeing to be barred from serving as an officer or director of a public company for five years and to pay a civil monetary penalty of $923,740. The settlement is subject to court approval.

The SEC’s investigation was conducted by John P. Mogg of the Division of Enforcement’s Market Abuse Unit in the San Francisco Regional Office with assistance from Patrick McCluskey, John S. Rymas, and Ainsley Kerr of the Market Abuse Unit’s Analysis and Detection Center. The matter was supervised by Rahul Kolhatkar and Mr. Sansone. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

The Securities and Exchange Commission today announced insider trading charges against Roy Cook, a former board member of Tallgrass Energy LP, and four of his friends for trading on material nonpublic information in advance of a public announcement that Blackstone Infrastructure Partners had offered to acquire Tallgrass and take it private. The SEC also charged Cook for failing to file required disclosure reports concerning securities transactions by family trusts. All five of the defendants agreed to settlements that, in aggregate, include more than $2.2 million in disgorgement, prejudgment interest, and civil penalties.

According to the SEC’s complaint, Cook learned in late July 2019 that Blackstone, which had acquired 44 percent of Tallgrass’s public shares earlier that year, was planning to make an offer to acquire the remainder of Tallgrass’s publicly traded shares. Within weeks of learning that information, Cook allegedly tipped his friends, Jeffrey Natrop, Peter Renner, James Rudolph, and Peter Williams, who all purchased Tallgrass securities prior to an August 27, 2019, public announcement of Blackstone’s offer.

The complaint alleges that Natrop and Renner, who were friends and business associates of Cook’s, purchased Tallgrass call options on August 8 and 9, 2019, which resulted in illicit profits of $43,862 for Natrop and $13,520 for Renner. The complaint further alleges that Cook tipped Rudolph while the two were in the Bahamas celebrating Rudolph’s birthday on Rudolph’s yacht and that Rudolph purchased Tallgrass stock on August 6, 2019, which resulted in illicit profits of $31,035. The complaint also alleges that Cook tipped Williams, his long-time friend and personal accountant, and that Williams purchased call options on August 19 and 21, 2019, which resulted in illicit profits of $463,000.

Following the August 27 announcement, which saw Tallgrass shares increase by 36 percent, Cook served for several months as chair of a Tallgrass Conflicts Committee tasked with assessing Blackstone’s offer and negotiating the final terms of the transaction. In connection with this role, Cook allegedly learned material nonpublic information about the status of the negotiations that he communicated to Williams, who purchased Tallgrass stock in a Cook family trust account over which he had trading authority, resulting in $88,800 of illicit profits for Cook. The complaint further alleges that, on December 10, 2019, while on vacation in Chile, Cook tipped Williams more material nonpublic information about the status of the negotiations, and Williams purchased more call options in his personal account, resulting in additional illicit profits of $61,525.

“As our complaint alleges, Roy Cook took advantage of his position as a Tallgrass director to repeatedly enrich himself and his friends,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement. “We will hold accountable board members and others who misuse inside information for their own benefit and violate the trust placed in them by shareholders.”

The SEC complaint, filed in U.S. District Court for the Eastern District of Wisconsin, charges the defendants with violating the antifraud provisions of the federal securities laws and charges Cook with failing to file required reports concerning Tallgrass securities transactions by family trusts. Without admitting or denying the allegations in the complaint, Cook agreed to pay a civil penalty of $801,742 and disgorge his illicit trading profits, with prejudgment interest. Cook also agreed to an officer-and-director bar.

Without admitting or denying the allegations, each of the other four defendants agreed to pay a civil penalty equal to the amount of their allegedly illicit trading profits and disgorge their illicit trading profits, with prejudgment interest.

The SEC’s investigation was conducted by David Frisof and Brian Vann, with assistance from Dean M. Conway, James Carlson, and Brian Shute. The case was supervised by Brian Quinn.

The SEC appreciates the assistance of the Financial Industry Regulatory Authority, the FBI, and the U.S. Attorney’s Office for the District of New Jersey.

According to the SEC’s complaint, Loudon allegedly misappropriated material, nonpublic information about the proposed acquisition from his wife, a BP mergers and acquisitions manager who worked on the planned deal. The SEC alleges that Loudon overheard several of his wife’s work-related conversations about the merger while she was working remotely. Without his wife’s knowledge, Loudon purchased 46,450 shares of TravelCenters stock before the merger was announced on February 16, 2023. As a result of the announcement, TravelCenters’ stock rose nearly 71 percent. Loudon allegedly immediately sold all of his TravelCenters shares for a profit of $1.76 million.

“We allege that Mr. Loudon took advantage of his remote working conditions and his wife’s trust to profit from information he knew was confidential,” said Eric Werner, Regional Director of the SEC’s Fort Worth Regional Office. “The SEC remains committed to prosecuting such malfeasance.”

The SEC’s complaint, filed in U.S. District Court for the Southern District of Texas, charges Loudon with violating the antifraud provisions of the federal securities laws. Without denying the allegations in the SEC’s complaint, Loudon consented to the entry of a partial judgment, subject to court approval, permanently enjoining him from violating the antifraud provisions of the federal securities laws, imposing an officer and director bar, and ordering that he pay disgorgement with prejudgment interest and a civil penalty in amounts to be determined by the Court.

In a parallel action, the U.S. Attorney’s Office for the Southern District of Texas announced criminal charges against Loudon today.

The SEC’s ongoing investigation is being conducted by Julia Huseman and Jamie Haussecker of the SEC’s Fort Worth Regional Office, under the supervision of Jim Etri and B. David Fraser. The litigation will be led by Jason Rose and supervised by Keefe Bernstein. The SEC appreciates the assistance of the Financial Industry Regulatory Authority, the FBI, and the U.S. Attorney’s Office for the Southern District of Texas.