Two charged with insider trading in Kodak ahead of COVID-related loan announcement (updated)

Eastman Kodak

23/02/2023 17:17

(Adds details from indictment, background about loan, comments
from U.S. Attorney)
    By Jonathan Stempel
       NEW YORK, Feb 23 (Reuters) - A former pharmaceutical
executive and his cousin were charged on Thursday with insider
trading in Eastman Kodak Co  KODK.N  stock based on tips that
the company was lining up a $765 million loan early in the
COVID-19 pandemic to make pharmaceuticals.
    Prosecutors said the executive, Andrew Stiles, had been
employed with a company that was working with Kodak to obtain
the federal loan, and passed material nonpublic information
about its progress to his cousin Gray Stiles.
    Kodak shares last traded at $2.62 before the planned loan
from the U.S. International Development Finance Corp, or DFC,
was announced on July 28, 2020.
    The share price ballooned as high as $60 within two days,
reflecting investors' surprise as the Rochester, New York-based
company, known for cameras and film, sought to remake itself.
    According to the indictment, the defendants' illegal trading
in Kodak stock resulted in profits of more than $500,000 for
Andrew Stiles and more than $700,000 for Gray Stiles.
    The indictment described coded text messages between the
defendants about the loan, including where Gray Stiles referred
to it as "film we sent off a few weeks ago to get developed."
    One day before the proposed loan was announced, Andrew
Stiles texted his cousin "tmw," prompting Gray Stiles to respond
"hot damn," the indictment said.
    Lawyers for the defendants did not immediately respond to
requests for comment. The charges were announced by U.S.
Attorney Damian Williams in Manhattan.
    Andrew Stiles was arrested in South Carolina and Gray Stiles
was arrested in Virginia, where they respectively live.
    The defendants, both 37, were each charged with three counts
of securities fraud and one count of conspiracy.
    Kodak was not charged. It has said the DFC advised last
April that the loan would not be issued.    
 (Reporting by Jonathan Stempel in New York; Editing by Bill
Berkrot)
 ((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))