Robert Berlacher, A Pennsylvanian manager of hedge funds, claimed a triumph in his war with the Securities and Exchange Commission after U.S. District Judge Mitchell Goldberg threw out most of the charges against him and declined to levy civil penalties or pre-judgment interest.
Berlacher was found to have misrepresented his positions before participating in a pair of private investments in public entities and ordered to pay $352,364 in illegal profits. But Judge Goldberg, who heard the three-day bench trial in March, said that Berlacher was not guilty of insider-trading in one case because the PIPE-issuing company’s stock price failed to move much in the wake of the announcement. Goldberg also ruled in Berlacher’s favor on securities fraud charges in two other PIPE deals.
A PIPE, or private investment in public equity, is a deal in which publicly traded equity securities (common stock, preferred stock, warrants, etc) are sold to private investors. U.S. investors get to choose whether to register the PIPE offering with the SEC or privately place the securities on an exempted basis.
“The SEC has not sustained its burden of proof on the insider-trading count and two of the fraud claims,” Goldberg wrote. “The SEC has met its burden on two separate fraud claims.”
“We are gratified that today’s decision by the court rejects the lion’s share of the SEC’s claims and its overreaching attempt to mischaracterize certain conduct as a violation of federal law,” Berlacher’s lawyer, Nicolas Morgan, said in a statement.
The SEC had accused Berlacher of participating in four PIPE deals in which shorting the companies’ shares after learning in advance about the placements and without telling the companies issuing the shares.