Jordan Qsar, Austin Bernard, Chase Lambert and “Finance Person” all played baseball at Pepperdine University. After graduating, Finance Person ended up working at Jack in Box in the strategic finance group. Qsar went on to play for the minor league teams of the Tampa Bay Rays and other teams. Qsar played with Grant Witherspoon in the minor leagues.
Qsar was back in San Diego during a break in the season and went drinking with Finance Employee, Bernard and Lambert. The drinks must have made Finance Employee forget the confidentiality requirements at work. He was working on the acquisition of Del Taco. He told Qsar about it.
Qsar tipped off Witherspoon, Bernard, and Lambert about the transaction. There is a big collection of texts from the baseball players about buying lots of options in Del Taco stock in the SEC complaint. Most of the options were very inexpensive because they were out of the money. Del Taco did not trade above $8.67 during the relevant period. They were buying options with a strike price of $10. The options were inexpensive because they had $0 value if the Del Taco stock price didn’t rise above $10 in a few months.
The transaction was announced with an price of $12.51 for each Del Taco share. The four made ten of thousands of dollars in illegal profits. That’s a lot of tacos.
Those purchases of lots of out of the money options would have set off alerts at the compliance departments of their brokerage accounts. Those alerts ended up in the hands of the Securities and Exchange Commission and the Department of Justice.
Lambert was not included in the criminal action against the other three. It’s not clear whether he cooperated or the DOJ thought his actions were less egregious.
Finance Employee was not named and not charged. I assume he at least heeded his job requirements of not trading in the stock of acquisition targets. As to whether he kept his job, I would think he was quickly fired.
Of course, all of these are just charges in the SEC complaint and DOJ complaint. The defendants have not had a chance to tell their side of the story and how they came to trading in Del Taco options with little money in their accounts.
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