(Bloomberg) -- A former senior supervisor at the Federal Reserve Bank of Richmond pleaded guilty to insider trading with confidential information obtained from some of the banks he was responsible for regulating.
Robert Thompson, 43, admitted on Tuesday in federal court in Richmond that he made the illegal trades and lied to the Federal Reserve by denying he owned shares of publicly traded financial institutions, the US Justice Department said in a statement. He is scheduled to be sentenced on March 19.
Prosecutors charged Thompson this month with making about $771,678 in profit from 69 illegal trades in more than seven financial institutions. The banks weren’t identified by prosecutors, but a separate US Securities and Exchange Commission lawsuit filed Nov. 8 against Thompson identified at least two of them as New York Community Bancorp and Capital One Financial Corp.
Thompson, who worked at the regulator for two decades, recently managed a team that supervised and conducted exams of US banks with at least $100 billion in assets, excluding the eight largest, according to the SEC. In his role, he was prohibited from trading shares of banks and was required to disclose every year any conflicts of interest or bank holdings.
The Federal Reserve has come under scrutiny for trading by officials, including two former policymakers who were cleared of wrongdoing earlier this year following an internal probe into trades they made in 2020. The Fed has since imposed new rules that bar top officials from purchasing individual stocks and bonds, limited trading and required the sale of certain assets before joining the regulator.
Thompson had regular access to confidential information about banks, including unreleased earnings data; capital, liquidity, and risk levels; and records of bank examinations, stress tests, and other regulatory events, according to the SEC complaint.
In October 2023, Thompson received an email from a Fed colleague revealing Capital One would report earnings exceeding analysts’ estimates, according to the SEC. Thompson purchased shares hours before the earnings release and made about $79,346 in profit when the shares rose after the results were made public, according to the lawsuit.
In January, Thompson found out that New York Community Bancorp planned to announce unexpected and significant losses from loans it took on as part of its March 2023 purchase of Signature Bank, according to the SEC. He purchased put options, which is essentially betting that the bank’s stock would fall, according to the lawsuit. Thompson ended up making $505,527, or a 3,745.2% return from the trade, the regulator alleged.
The case is US v. Thompson, 24-cr-164, US District Court, Eastern District of Virginia (Richmond).
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