SEC Busts Insider Trading With Help of Ex-Wife

Karen and David Zilkha’s marriage ended in messy divorce proceedings that included spousal abuse, restraining orders, an ongoing battle over their nine-year old twins and a SEC investigation.

Their marriage began in 1998 in Washington State where Mr. Zilkha worked for Microsoft. By 2001 the family had moved to Connecticut and a new job for Mr. Zhilka as a trader with hedge fund Pequot Capital Management. By 2003 their marriage was over and the divorce wars began. Eventually the financial aspects of their divorce were completed with Ms. Zilkha receiving $750,000.00 in assets including the family home.

The conflict started up again in 2008 when child support was to be reviewed. Mr. Zilkha filed updated financial information which included disclosure of a sum of $2.1 million. His ex-wife and her lawyer were mystified about the emergence of this asset, but then Ms. Zilkha remembered that before the collapse of the marriage, her husband had told her that he was negotiating a payment from Pequot.

Ms. Zilkha’s attorney knew that her client had kept the family computer and wondered if there was information about this money in old emails. What she found turned the case from a high conflict divorce case to a Securities Exchange Commission investigation of insider trading.

Emails retrieved from the computer hard drive provided proof that Mr. Zilkha had obtained confidential information from a former colleague at Microsoft that led to Pequot selling Microsoft shares with a payout to Pequot of $14 million.

Investigators at the SEC had long suspected that Mr. Zilkha had been involved in insider trading but with no “smoking gun” the investigation had languished.

CEO of Pequot, Arthur Samberg and Pequot paid fines and penalties to settle the case amounting to $28 million. Mr. Samberg, once the world’s largest hedge fund manager, sold the assets of Pequot and shut it down. Mr. Zilkha faces administrative charges with respect to his role as “tipper”.

Did Ms. Zilkha eventually get her child support? Don’t know, but under new legislation she received a reward of $1 million from the SEC for providing the evidence that was needed to convict.

Lawdiva aka Georgialee Lang

6 thoughts on “SEC Busts Insider Trading With Help of Ex-Wife

  1. Georgialee, just about everything you write about me, David Zilkha, in this posting is wrong, especially that “The conflict started up again in 2008 when child support was to be reviewed.” Who told you this? Not me certainly, as you never contacted me either to check your facts or to get my perspective or a comment from me. In 2008, after not seeing my twin children from November 2004 – April 2005 and again for just about all of 2007, I filed to have the court enforce my joint legal custody and give me a proper divorced-Dad relationship with my kids. Whereupon my ex-wife Karen turned over the hard drive which she had removed (where did you ever get the notion of “kept “?) from the computer in 2003, to prevent me discovering her affair with her now-husband, to the SEC in the hope of putting me out of reach of my kids, in jail, behind bars, after not coming forward to the SEC with it in 2005 when she, unlike I who was told that the computer had crashed in 2003, knew at the time that she had it and that the investigation was going on.

    Articles like this which defame me viciously and confuse the family court are one of the reasons why I have not seen my children since Karen started withholding them from me again in August 2009, 3 years ago now, in clear violation of my joint custody. As an (albeit unwilling, I’m sure) tool in Karen’s battle to estrange me from my own children, I ask you please take this article down immediately from your Lawdiva’s Blog so that my kids stop seeing this stuff when they google their Dad, just as I found it myself, and take it as reason not to see me. Misrepresentations of this kind have destroyed my life these past 2 years, making it impossible to work, love and essentially live, wherever people Google each other.

    David Zilkha

  2. David I understand how the situation you have found yourself in may be difficult, however, there are many stories on the internet about your SEC case and your divorce. Your case was and is one of the first of its kind with respect to the subject of a spouse utilizing social media as evidence against their spouse.

    If you care to send me the Reasons for Judgment of your case I will review my post to determine if I have misstated any of the relevant facts. My review of my research indicates there is nothing defamatory in my story. I may, however, have characterized the court hearing as a child support hearing rather than a custody hearing.

    Nonetheless, the provision of your updated financial documents to the court triggered your ex’s recollection and search for emails, leading to the SEC investigation and the findings made against you by the SEC, which I have not reported.

    If you wish to tell me your side of the story, please do so but as I understand it, the court did not accept your version of events regarding your quest for access to your children.

    If you read more of my posts you will see that I am reviled by a parent who tries to erase their former spouse from their children’s lives and am sympathetic to fathers who are wrongly denied parenting time. Unfortunately, the evidence levelled against you was accepted by the court as credible and played a significant role in the court’s decision.

    I wish you all the best in re-establishing healthy relationships with your children.

    1. Georgialee, I want to thank you for getting back to me so quickly, for the forthrightness of your defense of your posting and for standing up against the cruelty towards not only the father but also the children at the receiving end of parental alienation in the instance you mention in your reply to me above, if I understand your reference correctly. Please e-mail me an address for you so that we can continue our discussion offline where it now belongs. If you really mean “I wish you all the best in re-establishing healthy relationships with your children”, please honor this request. Thanks much, David.

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