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NEW YORK, June 25 (Reuters) - U.S prosecutors in Manhattan unsealed an indictment on Wednesday against two men they said participated in a ring of information-sharing that led to illegal trading in a technology company acquired by IBM in 2009.
Daryl Payton Jr. and Benjamin Durant III were arrested on Wednesday morning, a spokesman for the Federal Bureau of Investigation said. Each faces five counts of securities fraud and one count of conspiracy to commit securities fraud, according to the indictment.
Reuters could not reach the two men for comment because they were in federal custody. Their lawyers could not immediately be identified.
Three people have already admitted to sharing and trading on secret information provided by a corporate lawyer working on IBM's purchase of the software maker SPSS Inc in 2009.
Court filings show that prosecutors tacked Wednesday's indictment onto the earlier case, in which the lawyer shared information about the SPSS deal with his friend, Trent Martin, an analyst working for the Royal Bank of Scotland, who in turn told his roommate, Thomas Conradt.
Conradt and another trader at his firm, Euro Pacific Capital Inc of Westport, Connecticut, bought call options on SPSS before IBM's bid was announced. Martin, Conradt and the other trader, David Weishaus, pleaded guilty to charges related to the trades last year.
Payton and Durant were also working for Euro Pacific at the time of the trading, according to public records kept by the Financial Industry Regulatory Authority. FINRA records show that they left Euro Pacific Capital at the same time the U.S. Securities and Exchange Commission informed the firm it was investigating the two men for options trades they made. The firm is not named in the indictment, which describes it as "Securities Trading Firm-1."
Wednesday's indictment said Conradt tipped Durant and Payton to the SPSS deal and the two bought call options on SPSS. Euro Pacific's compliance department noticed the trades and opened an internal investigation.
When asked how he came to trade in SPSS stock, Durant said he had heard about SPSS while researching investment opportunities on Fidelity.com, according to the indictment. Payton said he had heard about the stock from Durant. They then refused to answer further questions about the trades and were fired, according to the indictment.
The case is US v. Benjamin Durant and Daryl Payton, U.S. District Court, Southern District of New York, No. 12-cr-00887. (Reporting By Emily Flitter; Additional reporting by Nate Raymond and Joseph Ax; Editing by Jonathan Oatis)