Two charged with insider trading in Kodak ahead of COVID-related loan announcement

By Jonathan Stempel

NEW YORK (Reuters) -A former pharmaceutical executive and his cousin were charged on Thursday with insider trading in Eastman Kodak Co stock based on tips that the company was lining up a $765 million loan early in the COVID-19 pandemic to make pharmaceuticals.

Prosecutors said the executive, Andrew Stiles, had been employed with a company that was working with Kodak to obtain the federal loan, and passed material nonpublic information about its progress to his cousin Gray Stiles.

Kodak shares last traded at $2.62 before the planned loan from the U.S. International Development Finance Corp, or DFC, was announced on July 28, 2020.

The share price ballooned as high as $60 within two days, reflecting investors’ surprise as the Rochester, New York-based company, known for cameras and film, sought to remake itself.

According to the indictment, the defendants’ illegal trading in Kodak stock resulted in profits of more than $500,000 for Andrew Stiles and more than $700,000 for Gray Stiles.

The indictment described coded text messages between the defendants about the loan, including where Gray Stiles referred to it as “film we sent off a few weeks ago to get developed.”

One day before the proposed loan was announced, Andrew Stiles texted his cousin “tmw,” prompting Gray Stiles to respond “hot damn,” the indictment said.

Lawyers for the defendants did not immediately respond to requests for comment. The charges were announced by U.S. Attorney Damian Williams in Manhattan.

Andrew Stiles was arrested in South Carolina and Gray Stiles was arrested in Virginia, where they respectively live.

The defendants, both 37, were each charged with three counts of securities fraud and one count of conspiracy.

Kodak was not charged. It has said the DFC advised last April that the loan would not be issued.