A former executive of

Score Media & Gaming Inc.

has settled

insider tipping and trading

allegations with Canada’s largest securities regulator after admitting he arranged for a friend of his wife’s to buy options in the company ahead of a US$2 billion takeover.

The purchase of US$7,000 of Score Media call options shortly before the Aug. 5, 2021 announcement that the Toronto-based digital media sports company would be acquired by Pennsylvania-based Penn National Gaming Inc. resulted in a profit of about US$311,000, according to a document made public by the

Ontario Securities Commission

on Friday.

According to an agreed statement of facts, Huy Le Huynh, who was a VP Finance at Score, learned about the acquisition before it was announced and told his wife, Thi Anh Nguyet (Nancy) Pham, who was a finance manager on parental leave from Bell Canada. He knew that neither of them could purchase or sell Score securities until the acquisition was announced publicly.

 

“Huynh enlisted Pham’s friend, (

Jessica)

Tam, to profit from his knowledge of the Acquisition by using Tam as an intermediary to purchase Score securities through her

TFSA

,” according to the agreed facts.

Huynh and Tam met at the couple’s house and on a playground in July of 2021 to discuss “some investment thing” as well as options trading.

“Huynh presented Tam with an opportunity to invest with him in Tam’s TFSA, which he described as an ‘investment arrangement… (and) gave Tam $10,000 to deposit in her TFSA,” according to the agreed facts presented in the OSC settlement agreement. “Huynh would provide Tam with trading instructions, either in person or via telephone, and Tam would make the trades in her TFSA.”

He also proposed that the profits of the scheme be split, with 80 per cent for Huynh and Pham, and 20 per cent for Tam, according to the agreed facts.

Then, on July 28, 2021, Huynh told Tam to purchase Score call options in her TFSA, and on July 29, 184 options were purchased for US$5,152. On August 2, Huynh told Tam to purchase more options and another 120 were purchased in the TFSA for US$1,800.

According to the agreed facts, Huynh told Tam to pay his share of the profits slowly, and in cash, once the deal was announced. She communicated with the couple on WhatsApp to arrange delivery, using codewords such as “toys,” with one toy referring to $10,000.

Huynh and Pham received $270,000 in cash from Tam.

Pham was generally aware that her husband and her friend, who she’d known since high school, had a plan to trade in Score, but she was not aware of the specifics of the plan, according to the agreed facts.

 

Later, on Dec. 12, 2021, Huynh and Pham met Tam in person.

“Huynh told Tam to delete his contact information from her phone and gave Tam the name and contact information of a lawyer to call if anyone asked questions about the Score trades,” according to the agreed facts.

He also gave Tam written instructions to use part of his remaining share of the profits in her TFSA to buy other securities.

Once the OSC began investigating the trading, the couple, who had no history of prior misconduct with any securities regulator, cooperated and, thus, received credit for this mitigating factor in the settlement.

In addition, Huynh admitted his role in the insider trading scheme. Pham admitted that she engaged in conduct “contrary to the public interest” in relation to the trading because she knew was aware of the acquisition prior to the announcement, knew that Huynh and Tam made a plan to trade in Score securities, and accepted the benefits of the insider trading.

As part of the settlement, Huynh paid a $325,000 administrative penalty, and disgorged $270,000 to the OSC. He also paid $40,000 towards to the cost of the investigation.

In addition, he has been banned for seven years for trading in securities other than certain personal investments he has including registered education savings plans for his children, and is prohibited from becoming a director or officer for seven years.

Pham faces similar bans for three years and paid $10,000 towards the cost of the OSC investigation.

There were no allegations against Tam.

This was not the first case of insider tipping and trading involving the acquisition of Score Media by Penn National.

On June 13, 2022, the

U.S. Securities and Exchange Commission

charged a former software engineer at Penn National Gaming’s subsidiary Penn Interactive Ventures with insider trading.

 

The SEC’s complaint, filed in federal district court in Philadelphia, alleged the engineer was given confidential information about Penn National’s interest in acquiring Score Media along with admonitions not to trade on that information, but he bought 500 out-of-the-money call options on Score Media in the weeks and days leading up to the acquisition announcement.

The regulator alleged that his trading resulted in unlawful profits of $560,762, and also accused him of tipping a longtime friend.

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• Email: bshecter@nationalpost.com