SEC v. John C. Lowe, Jr., JJL Capital LLC, Great South Bay Capital, LLC, et al. — U.S. Securities and Exchange Commission Litigation Release No. 26236, dated February 3, 2025.
Four individuals and their associated entities are charged with fraud for a long-running scheme to unlawfully trade in advance of numerous follow-on stock offerings. The scheme involved leaking material non-public information about offering timing and pricing, which allowed traders to profit by shorting the stock before the announcements.
In Plain English
Imagine someone knows a store is about to get a big shipment of a popular toy, and they know the price will drop after the shipment arrives. They tell a friend, who then sells all their own toys to a neighbor, expecting to buy them back cheaper later. This case is similar, but with stock prices and secret information about company stock sales.
Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.
How the Alleged Scheme Worked
- Information Leak From at least January 2018 to March 2024, David Cooper, a registered representative at a brokerage firm, and another colleague allegedly engaged in an unlawful arrangement. They obtained material, non-public information about the timing and price of numerous follow-on stock offerings from employees at underwriting firms.
- Information Relay Cooper and his colleague then provided this confidential information to securities traders John Lowe and Richard Ringel, who held accounts at the same brokerage firm. Cooper allegedly shared information with Ringel, while his colleague shared similar details with Lowe.
- Further Dissemination John Lowe, in turn, allegedly passed the material, non-public information he received to Randy Grewal.
- Short Selling Strategy Lowe, Ringel, and Grewal, along with their controlled entities (JJL Capital LLC, Great South Bay Capital LLC, Kierland Capital LLC, and BMEN Trading LLC), allegedly used this advance knowledge to short sell the stocks of numerous companies before their follow-on offerings were publicly announced.
- Profit Generation By shorting the stock before the public announcement, and often before the price fell due to the offering, the traders could cover their short positions by buying the stock at a lower price, thereby locking in substantial illicit profits.
- Quid Pro Quo In exchange for the confidential offering information, Lowe and Ringel agreed to buy shares in the offerings where the brokerage firm was part of the selling syndicate. This generated fees for the brokerage firm, a portion of which was paid to Cooper and his colleague, resulting in substantial compensation for them.
- Scheme Scope During the Relevant Period, Lowe and his controlled entities, JJL Capital LLC and Great South Bay Capital LLC, allegedly sold short in advance of at least 200 issuers' offerings, reaping profits of at least $900,000.
The Enforcement Action
On January 15, 2025, the SEC filed fraud charges against John C. Lowe, Jr., JJL Capital LLC, Great South Bay Capital, LLC, Randy Grewal, Kierland Capital, LLC, Richard L. Ringel, BMEN Trading, LLC, and David Cooper. The SEC alleges that from at least January 2018 to March 2024, defendants engaged in a scheme to unlawfully trade in advance of numerous follow-on offerings by leaking and trading on material, non-public information about the timing or price of these offerings. The SEC seeks permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties.
Named in this action: John C. Lowe, Jr., JJL Capital LLC, Great South Bay Capital, LLC, Randy (aka “Ranjiv”) Grewal, Kierland Capital, LLC, Richard L. Ringel.