(Reuters) — An online stock trader who profited from inside information passed to him by a former Microsoft Corp. finance employee was sentenced to 1½ years in prison in Seattle on Friday.
Sean Stokke had pleaded guilty to charges of insider trading, which federal prosecutors said netted more than $400,000 in illicit profits over an 18-month period for him and his Microsoft accomplice, Brian Jorgenson.
Prosecutors had asked for a 1½-year sentence for Mr. Stokke, 29, far short of the maximum prison sentence of 20 years for the charges of criminal insider trading, given his cooperation with investigators. Stokke's attorney had asked for greater leniency.
In handing down the sentence during a hearing in Seattle, U.S. District Court Judge Marsha Pechman said a prison term was vital to "send a message" to employees at local companies who might be tempted by insider trading.
Mr. Jorgenson, 32, who was fired by Microsoft after the scheme came to light, is set to be sentenced in the next few weeks.
The U.S. Department of Justice and the U.S. Securities and Exchange Commission jointly charged the two men in December with a sophisticated insider trading scheme. Mr. Stokke struck a plea deal with prosecutors in April, providing details of the scheme.
According to charging documents, the pair's cooperation began in April 2012 when Mr. Jorgenson found out through his job in Microsoft's treasury department that the software company was planning a multi-million-dollar investment in the digital business of bookseller Barnes & Noble Inc.
He passed that information to Mr. Stokke, who bought options betting that Barnes & Noble's stock would rise. The stock jumped about 50% when the investment was announced in late April 2012, reaping Mr. Stokke a profit of more than $184,000, prosecutors said.
Mr. Stokke, who had previously worked with Mr. Jorgenson at an asset management company, shared the profits with his partner via envelopes stuffed with $10,000 in cash, according to the charges, which resulted from probes by the Federal Bureau of Investigation and the SEC.
The pair repeated a similar process twice more in the following 18 months, prosecutors said, buying options on Microsoft stock or an exchange-traded fund prior to the release of earnings that Mr. Jorgenson knew would surprise Wall Street and cause sharp moves in the stock.
The two men took in a total profit of $414,000 from the combined trades and planned to start their own hedge fund, according to prosecutors.
The case is United States of America v. Sean T. Stokke, case number 2:14-cr-00099-MJP in the U.S. District Court for the Western District Of Washington.