Feds nab insider trader at Nasdaq

May 27, 2011, 12:19 AM UTC

Apparently Bernie Madoff wasn’t the only bad apple at Nasdaq.

In the latest shining moment for the U.S. stock exchanges, the Securities and Exchange Commission on Thursday charged Donald Johnson, a former Nasdaq managing director, with ripping off investors to the tune of $755,000 by insider trading ahead of the release of corporate press releases.

Johnson, you will be impressed to learn, was in charge through October 2009 of the Nasdaq’s “market intelligence” desk, which is surely a misnomer but seems in any case to have afforded him with a lot of info he used to trade profitably on outfits like United Therapeutics (UTHR). 

Fearless leader

The SEC has come under heavy fire in recent years for its failure to nab Madoff, a three-term Nasdaq chairman in the 1990s, before he frittered away $20 billion in the biggest-ever Ponzi scheme. But the agency is doggedly trying to restore its good name by putting really catchy quotes in its press releases, an effort that was much in evidence Thursday.

“This case is the insider trading version of the fox guarding the henhouse,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Instead of protecting NASDAQ client confidences, Johnson secretly traded on client information for personal gain, even using his NASDAQ office computer to make the trades.”

If you can imagine! As it happens, Johnson also pleaded guilty Thursday in a rather more serious criminal insider trading case, the U.S. attorney for the Eastern District of Virginia said. That one could get him 20 years in jail, regardless of whether the fox admits or denies his responsibility in this particular henhouse.