TheStreet.com 'Squawk' Probe Figure Spoke of Broker Access Monday March 14, 4:09 pm ET By Matthew Goldstein, Senior Writer An emerging figure in the SEC's probe of illegal Wall Street stock tips once tried to recruit traders by claiming he had access to Merrill Lynch's (NYSE:MER - News) internal communications system, sources say. ADVERTISEMENT Former AB Watley (OTC BB:ABWG.OB - News) CEO John Amore allegedly boasted that he connected datytraders at his small New York firm into Merrill Lynch's "squawk box" system in order to gather information about pending block trades, say people familiar with Amore. The former Watley executive often mentioned his supposed access to Merrill's internal communication system as a recruiting tool in trying to lure other traders to Watley, these people say. To a lesser degree, sources say, Amore made similar claims about his access to Lehman Brothers' (NYSE:LEH - News) squawk box. No source had knowledge about whether Amore's claims were true. A Merrill Lynch spokesman declined to comment on the allegation. A Lehman spokeswoman also declined to comment. Amore, indicted last summer by federal prosecutors on an unrelated securities matter, has surfaced as a key figure in the eight-month investigation into the leaking of illegal stock tips to daytraders and others. In the investigation, federal prosecutors and the Securities and Exchange Commission are looking into allegations that daytrading firms and hedge funds paid brokers to secure unauthorized access to internal brokerage calls. The investigation, which began last summer, is focusing on allegations that the brokers received kickbacks or other compensation such as order flow in return for connecting traders to the calls. Getting a tip about a block trade, a single trade of 10,000 or more shares, can be advantageous to traders trying to cash in on sudden price movement in a stock. Such tips could have permitted daytraders to engage in front-running, an illegal practice in which a person buys or sell shares ahead of a trade he suspects will move a stock's price. TheStreet.com reported previously that people familiar with Watley said daytraders in the firm's proprietary operation had access to squawk box communications coming from several brokerage houses. Watley shut down its proprietary trading operation early last year, soon after the firm fired Amore in September 2003. Last week, TheStreet.com reported that Lehman was one of the Wall Street firms contacted by the SEC in conjunction with the Watley investigation, according to people familiar with the inquiry. On Monday The Wall Street Journal reported that Amore is believed to be cooperating with the federal investigation, possibly in the hopes of lighter penalty in the pending securities fraud case against him. In that matter, reported last Friday by TheStreet.com, federal prosecutors in Brooklyn charged Amore with defrauding investors in a small hedge fund he managed, Amore Capital Group. The 18-count indictment, filed by prosecutors in the Eastern District of New York, charges that Amore lied to his investors about his education and his employment history. He also allegedly falsified records concerning a $3.2 million personal loan taken from the fund and created "fictitious quarterly statements" that were mailed to investors. Amore pleaded not guilty to the charges. His attorney, Nelson Boxer, declined to comment. The squawk box inquiry, meanwhile, is part of a broad investigation by prosecutors and the SEC into the misuse of confidential trading information. Last week, in what's believed to be a related action, federal authorities filed criminal and civil charges against Frank Furino, a former New York Stock Exchange floor clerk, for allegedly facilitating an illegal front-running scheme. The authorities contend that Furino passed on tips about upcoming big block trades to a unnamed daytrader in return for cash payments. The scheme generated $300,000 in illegal profits from trades placed from August 2001 through December 2001. The daytrader in the Furino investigation, identified only as an unindicted co-conspirator, was based in the former Great Neck, N.Y., office of Andover Brokerage, a daytrading firm that's now called Assent. Peter Discenza, an executive with Assent, which is based in Hoboken, N.J., said the firm has nothing to do with Andover. He said Assent purchased the assets of Andover and has a different management team. However, a number of people working and trading at Assent were previously with Andover. People familiar with Amore said the former Watley executive had a number of ties to Andover's Great Neck office. Amore, whose last known address was in the neighboring Long Island community of Plandome, N.Y., traded stocks out of the Andover office in Great Neck before joining Watley in September 2002. Amore's hedge fund was located in the same Great Neck building that had housed Andover's office. The hedge fund employed only a handful of employees, of whom one had been a former trader in Andover's Great Neck office.
Wall Street Firms Face Probe Over 'Squawk Boxes' From THE WALL STREET JOURNAL March 15, 2005 By Kara Scannell and Aaron Lucchetti Federal prosecutors are investigating whether the internal communication systems that broadcast confidential market information at several big-name Wall Street brokerage firms were compromised for quick profit, people familiar with the matter said. Among the firms are Merrill Lynch & Co., Citigroup Inc.'s Smith Barney and Lehman Brothers Holdings Inc., these people said. Representatives from Merrill Lynch and Lehman declined to comment. A Citigroup spokesman declined to comment, except to say that "we fully cooperate with any regulatory inquiry we may receive and are committed to adhering to all applicable client confidentiality rules." As previously reported, prosecutors from the U.S. Attorney's office in Brooklyn, N.Y., and the Securities and Exchange Commission are looking at possible eavesdropping by rapid-moving "day traders" on information about big stock orders that is transmitted over the firms' internal communications systems known as squawk boxes. It isn't clear whether investigators are looking at possible leaks through other brokerage firms' squawk boxes or how widespread the improper trading might be. The inquiry is part of a broader probe into whether market-moving information has been misused. Last week a former New York Stock Exchange floor clerk was charged with selling information about customer orders to a day trader. One top figure in the squawk-box investigation is day trader John J. Amore, the 42-year-old former chief executive of A.B. Watley Group Inc., a small New York brokerage firm. He is cooperating with the authorities, people familiar with the matter say. A lawyer for Mr. Amore declined to comment. Investigators are looking into whether Mr. Amore paid employees at brokerage firms to allow him to eavesdrop on information piped through the squawk boxes. One way the information could have been passed from the brokerage houses to day traders is via speakerphone. Brokerage employees sitting near squawk boxes at their firms could have had an outsider such as a day trader on the line and set their phones on speaker, allowing the outsider to listen to the squawk box and other conversations, a person familiar with the situation said. E*Trade Financial Corp., a brokerage and online-trading firm where Mr. Amore worked briefly in 2004, has been asked to provide information about Mr. Amore and a group of traders he worked with, a person familiar with the matter has said. Wall Street firms use the internal systems to communicate everything from benign market events to information on client trades to traders and other staffers in multiple locations. Because these big orders can move the price of a stock, short-term traders can make a quick buck at the expense of other investors if they jump in front of the order before the price moves. The question of how tightly information is controlled is getting a serious look across Wall Street. Traders and sales executives at Wall Street firms traditionally have had access to squawk box chatter, which is especially popular in the morning before the market opens.
finally that bastardo gets what he deserves! he defrauded over 88 accounts totalling well over $40 million dollars on estimate when he stole monies from the class B members of Onsite Trading to settle the class A member debts... he has escaped prosecution, vilification from the industry and defrauded his new employers / owners.... perhaps all this will catch up to him. that loathsome, pious, @#$%@#$%
Anyone with knowledge of the current "Squawk Box Scandal", John Amore, John Amore's false-returns hedge fund, or any related activities, can contact the Justice Department's U.S. Attorney's Office in Brooklyn, NY. Current updates of these events are being reported by Matthew Goldstein at TheStreet.com, and Aaron Lucchetti at the Wall Street Journal.
Mksummny in the previous post: try the post listed above to start your search. There is also an FBI agent named Butruch (pronounced Bew-trick) in New York, looking into these matters that have been reported in the press. Advise anyone you know to assist these law enforcement personnel.
Was it wilburbear or mksummy who wrote that agent Butruch was involved in AB Watley investigation? Not sure -- I'm new to this posting thing. To whoever posted agent Butruch's name: do you have contact info for him, such as a direct office phone number? I have info on a related matter vis a vis AB Watley that might be useful. Thanks.
Major story on this in today's Wall Street Journal (8/23/05). Amore finally cooperating according to published reports. Anyone with knowledge of these events should contact the Brooklyn Prosecutor's Office. A few guys even reported they had other names associated with these events.
I find it amazing that the SEC is cutting a deal with Amore, since it seems like he was the mastermind of the entire plan and he made the most money from it. If anything, it should be the brokers lining up to testify against Amore.