Middleman in 'napkin' insider trading ring gets one year in prison

September 21, 2016 3:19 PM EDT

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By Jonathan Stempel

(Reuters) - A mortgage broker who was the middleman in an insider trading ring involving stock tips passed on napkins and Post-its in New York's Grand Central Terminal to a Morgan Stanley stockbroker was sentenced to one year in prison on Wednesday.

Frank Tamayo, 43, was sentenced by U.S. District Judge Michael Shipp in Trenton, New Jersey, two years after pleading guilty to fraud and conspiracy charges. The defendant was also ordered to pay $1.06 million in restitution.

Tamayo was sentenced one week after Steven Metro, a former managing clerk at law firm Simpson Thacher & Bartlett who provided the tips, was ordered to serve 46 months, or nearly four years, in prison.

Vladimir Eydelman, the stockbroker, who made an estimated $5.6 million on his illegal trades, is scheduled to be sentenced on Sept. 30. Tamayo served as a cooperating witness against Eydelman and Metro.

"The sentencing is the last step in Mr. Tamayo trying to put this behind him and move on with his life," Tamayo's lawyer Ross Pearlson said in an interview. "As the government noted, his cooperation was exceptional and helped in securing the guilty pleas of his co-defendants."

Prosecutors said Metro would pass tips about mergers and other transactions that his firm was working on to Tamayo, a friend and law school classmate, who would write relevant ticker symbols on napkins or Post-its.

Tamayo would then pass the tips to Eydelman at Grand Central's main clock and afterward chew up whatever the tips were written on, prosecutors said.

The scheme unraveled in early 2014 after Tamayo began to secretly record the other defendants.

Tamayo could have been sentenced to between 46 and 57 months in prison under recommended federal guidelines. The one-year term reflected his cooperation, prosecutors and Pearlson said.

Neither Morgan Stanley nor Simpson Thacher was accused of wrongdoing.

The case is U.S. v. Tamayo, U.S. District Court, District of New Jersey, No. 14-cr-00542.

(Editing by Steve Olofsky)

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