How 4 minor league baseball players made $200,000 on Del Taco insider trading, complaint says: a night out drinking with a Jack in the Box analyst
The U.S. Attorney unsealed an indictment yesterday charging three current and former minor league baseball players with insider trading in Del Taco stock ahead of the fast food chain’s $585 million acquisition by Jack in the Box in 2022.
The three players, Austin Bernard, Jordan Qsar and Grant Witherspoon are connected because Qsar, 28, and Bernard, 27, attended Pepperdine University together and Qsar and Witherspoon, 27, were both drafted by the Tampa Bay Rays in 2018—Witherspoon in the fourth round. They became close friends and roommates, authorities said. Now, all three are facing a battery of charges related to conspiracy and securities fraud and could see 20 years in prison and $5 million in fines, according to the U.S. Attorney’s Office for the Southern District of California. A fourth player, Chase Lambert, who was drafted by the Pittsburgh Pirates in 2018 and also attended Pepperdine with Qsar and Bernard, was named in a Securities and Exchange Commission complaint yesterday. The SEC said the squad made nearly $200,000 from illegally trading.
According to the SEC, outfielder Qsar went home to San Diego in October 2021 during a break from baseball. When he was there, he went out drinking with a friend he knew from Pepperdine who worked in finance at Jack in the Box. At the time, the friend was working on the financial analysis for the California burger chain’s deal to buy Del Taco and talked about it with Qsar, the complaint says, which wasn’t unusual because the two were close and would often discuss romantic relationships and their finances. Qsar in mid-October and late November then bought call options for Del Taco stock, betting that when news of the deal came out it would boost the share price. Qsar also tipped off Bernard, a catcher, first-baseman Witherspoon and second baseman Lambert. Those three then purchased Del Taco call options, the agency said. Qsar texted Witherspoon and another teammate from the Rays, the SEC said, and the three began exchanging texts about buying Del Taco securities.
According to the complaint, Witherspoon wrote to Qsar and the other teammate, “check out this stock guys Del taco, (sic) this chart is looking bullish to me. Might try to gamble on some options or something, I love to eat at del taco.” The stock at the time was at $8.74 a share and Qsar wrote back: “I’m thinking about it too. Chart looks primed to boom. What’s it (sic) 52 week high?” Witherspoon wrote back: “$11.99. Could see it hitting $10 easy.” Qsar wrote back: “If we break 10 new 52 week highs could follow. The payout could be ridiculous if we buy the January 2022 calls.”
The SEC said the messages were an attempt to obscure that they were buying the call options because of what Qsar heard from his friend. Qsar didn’t know the timing of Jack in the Box’s deal to buy Del Taco but figured it would happen before the end of the year and that the call options would be the best bet on the highest profits. A week after the texts, Qsar, Witherspoon and their teammate all went to baseball training camp in Florida. On Oct. 15, 2021 in the locker room at training camp, Qsar, Witherspoon and their teammate bought Del Taco call options, Qsar for $465 and Witherspoon for $3,683. Both purchased a few more options later that week.
Later that month, Qsar texted Witherspoon that he was going to Los Angeles and would be driving with his friend from Jack in the Box. He sent a text with four devil-head emojis and wrote “4 hour call.” Witherspoon wrote back, “That’s incredible.” Qsar responded, “Hopefully about the good good.” Qsar bought more call options after the drive, the SEC said in the complaint. Qsar even joked with his Rays teammate about “catching a case” by putting their savings into the taco chain’s stock.
When Jack in the Box announced that it would buy Del Taco in December 2021, the stock price jumped 66%. Bernard, Lambert, Qsar and Witherspoon all sold their options and made a combined $189,000 in profits from the trades, the SEC said. Qsar made $56,500; Witherspoon made $42,800; Bernard made $64,700; and, Lambert made $25,100.
It appears from the complaint that Qsar also lost his friendship with the Jack in the Box executive, who received a list of people who had traded in Del Taco securities and it included Qsar and Witherspoon, the SEC said.
“The system has to be fair for everyone, or the market fails,” said U.S. Attorney Tara McGrath in a statement. “Those who seek to undermine this system for personal gain will face consequences.”
This story was originally featured on Fortune.com
