- $200 million manager Foxhill Capital founder Neil Weiner was accused of insider trading in a lawsuit.
- The suit was filed by a former analyst at the fund, claiming a violation of whistleblower protections.
- The lawyer for Foxhill and the individual defendants said that they “fully complied with the law.“
- See more stories on Insider’s business page.
Foxhill Capital founder Neil Weiner has been accused by his former analyst Joshua Nahas of insider trading in a new lawsuit filed in a New Jersey district court.
Nahas, according to the suit, was fired by Weiner after making an internal whistleblower complaint. He is suing for breach of contract and a breach of New Jersey’s state whistleblower protections law.
Weiner, who founded $200 million Foxhill in 2005, is alleged to have traded in two stocks he had inside information on, Cambium Learning and GNC, according to Nahas’ lawsuit.
Matthew McDonald, the attorney for Foxhill, Weiner, and chief compliance officer Patricia Young, declined to comment on the specifics of the lawsuit, but told Insider that “our clients are confident they fully complied with the law, in all respects, and will therefore prevail.”
Nahas, who runs consulting firm Wolf Capital Advisors, declined to comment on the suit.
The first alleged instance of insider trading, according to the lawsuit, happened in 2013, in Cambium Learning, the education technology company. Weiner was on the board of the company, but ended up disagreeing with Cambium’s majority owner, a private equity firm, that wanted to buy out the rest of the shares including Weiner’s.
The price the majority owner was willing to offer was lower than what Weiner thought they were worth, according to the lawsuit, and he resigned from the board, but kept his shares. Nahas alleges Foxhill’s outside counsel at the time told Weiner not to trade in the stock for at least 90 days since he had material non-public information — widely considered a key determinant of insider trading — because of his position on the board and the awareness of a potential deal.
The lawsuit claims Weiner ignored his counsel’s recommendation, completing 30 total trades and adding more than 400,000 shares of Cambium to his coffers within the 90-day window laid out by his outside counsel. Eventually, those shares were worth more than $6 million when the company was bought, the complaint says.
The second alleged instance is more recent, and one of the reasons Nahas says he was terminated, leading to the lawsuit. Nahas claims he made an internal whistleblower complaint about Weiner’s 2020 insider trading in GNC, the vitamins and supplements chain, and was fired as retaliation.
Nahas alleged the whistleblower complaint went to the firm’s chief compliance officer, Young, and his complaint cites the firm’s internal code of ethics saying whistleblowers won’t be retaliated against if an employee acts “‘in good faith in reporting a complaint or concern’ and ‘have reasonable grounds for believing a breach’ had occurred.”
“He expected the Company and Young to comply as well, particularly with the provisions of the [compliance] Manual promising protection for whistleblowers, including ‘securing the reporting person’s anonymity as well as managing his reported concerns ‘in a timely and professional manner confidentially and without retaliation,'” the suit reads.
Nahas’ complaint says that GNC was anticipating a bankruptcy due to the pandemic, and sought to renegotiate loan obligations, some of which were held by a fund advised by Foxhill. In June, the lenders of GNC entered into a NDA with the company to discuss the loan obligations confidentially which contained material non-public information, according to the lawsuit.
GNC was placed on Foxhill’s restricted list internally, meaning employees were not allowed to trade the security, but Weiner bought options in the bankrupt company without informing the lawyers for the lenders or the other lenders, Nahas alleges.
After being alerted to this by Nahas, the complaint continues, Weiner and Young met for a brief time, and then closed out of the trades, with Weiner saying he had covered immediately. Nahas says he was terminated by the company that same month.
Nahas is asking for “appropriate equitable relief” and “compensatory, consequential and punitive damages” though no exact amount is specified.
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