Penn National Employee Charged with Insider Trading

Amateur criminals often find that they’d have been better off leaving things to the professionals. In what may prove to be an example of that, the Securities and Exchange Commission (SEC) recently charged a Penn National Gaming employee with insider trading.

Earlier this month, the SEC alleged that David Roda, 36, and a childhood friend had improperly purchased 500 shares of stock in Score Media and Gaming, which owns theScore Bet. The trade allegedly happened just prior to Penn’s acquisition of the Canadian company last November.

Score’s stock increased by over 80% following the announcement of the sale. Roda and his buddy then allegedly cashed in their holdings for “unlawful profits of $560,762 and $5,602, respectively,” according to the SEC.

Roda is a freelance software engineer. Penn had brought him on as Director of Backend Architecture prior to their acquisition of Score.

Huge Profit on Call Options

Roda’s work for Penn began in 2019, doing software development work for its online sportsbook app. In March 2021, Penn National opened acquisition talks with Score. That June, the gaming company promoted Roda to his director position. In that role, he oversaw other sportsbook app employees and was assigned to perform due diligence.

It was at this point that, according to the SEC, Penn told Roda of the approaching acquisition. The SEC claims that on July 22, 2021, Roda used this material, non-public information to buy 200 Score Media call option contracts for approximately $13,000.

Assuming all the SEC’s figures are accurate, Roda made over a 40-fold profit on his trades.

The SEC’s description of what followed reads like something out of a Coen Brothers script.

The More, the Merrier

The SEC claims that after buying call options for himself, Roda then told his friend, Andrew Larkin, about his plan. Roda and Larkin had grown up in Lancaster, Pennsylvania together. They played basketball almost weekly and, according to court documents, “often discussed their personal and professional lives.”

On July 11, Roda ran into Larkin at a party at a mutual friend’s house. According to the SEC, he told Larkin that Penn National was in talks to acquire Score.

The next day, Larkin allegedly texted Roda asking how call options work.

A call option reserves for a market speculator the right, but not the obligation, to buy a stock at a set price. This can result in a big gain if the stock goes up in price before the option expires. If it fails to rise in value, the buyer will end up losing the money they paid to secure the option.

The SEC says that Larkin has confirmed that he was “examining options for the stock” they’d talked about at the party.

Incriminating Messages

Later that day, Larkin allegedly discovered that his brokerage account would not allow him to buy options. Instead, he purchased 375 shares of Score Media common stock, under the ticker symbol SCR.

The SEC says that Roda then told Larkin to download an encrypted messaging app so they could “talk freely.”

On August 4, Roda allegedly messaged Larkin using the encrypted messaging app. The SEC’s court filing quotes from the conversation:

Apparently we’re announcing the score acquisition tomorrow.

Once the acquisition went through, Larkin found that he’d turned his $6,750 investment into $12,352.

According to the SEC, Roda then sent Larkin a screenshot of the value of the options he’d purchased. Larkin allegedly responded, “Holy shit.” To which Roda told him he “should have gone harder.”

Larkin mused that Roda could use the money he’d earned to buy a house on the beach. Roda’s answer:

“ya if the SEC doesn’t come and take it and put me in jail.”

As if on cue, the authorities soon stepped in.

Trust Betrayed

The SEC’s press release quotes its Co-Acting Regional Director for Pennsylvania, Scott A. Thompson, as saying:

As we allege in our complaint, Roda was entrusted by his employer with critical, market-moving information, and he betrayed that trust by using the information to trade and also tip his friend so they could both profit.

When employees like Roda misappropriate and trade on confidential information, it erodes market confidence. The SEC remains committed to finding, investigating, and charging those who engage in insider trading.

Jennifer Arbittier Williams, the US Attorney for the Eastern District of Pennsylvania, expressed similar thoughts about the harms of insider trading:

Insider trading undermines faith in our financial markets and harms ordinary investors who play by the rules. As alleged, David Roda placed himself above the law by using information to which he had privileged access to cheat the market and other investors.

Williams’ office has filed its own criminal charges against Roda, with the assistance of the FBI.

Another Fine Pennsylvania Mess

Penn, which also holds a majority stake in Barstool Sports, first announced its acquisition of Score in August last year. At that time, it entered into a definitive agreement to acquire the Toronto-based company for approximately $2.0 billion in cash and stock. The transaction was completed in October.

That didn’t pan out as well as it had hoped, in the US at least. Earlier this month, Score announced the shuttering of its US sportsbooks on Canada Day, July 1. This will end the brand’s growth strategy south of the border, although it’s faring much better in Ontario’s new regulated market.

Roda’s alleged wrongdoings are small in scale compared to most insider trading. Larger schemes are often better concealed, and notoriously hard to prove.

Ultimately, the damage to Penn itself will also be minor. It’s only one in a series of problems the company has faced, however, some larger than others. In 2019, its Director of Benefits allegedly pocketed $75,000 in prepaid gift cards. More seriously, last November, its shares plummeted by 21% in light of the sex scandal surrounding Barstool and its volatile CEO Dave Portnoy. Those allegations continue to plague the company.

The case also comes on the heels of other allegations of insider trading related to BetMGMs acquisition of the Swedish gaming company LeoVegas. The two incidents are unrelated, however.

About the Author

Devon Jackson

Devon Jackson

Devon Jackson is a freelance writer with Bonus. He’s written for many different magazines and newspapers, from The New York Times and People to Sports Illustrated and Bloomberg. He has also worked as an editor—for The New Yorker, the Santa Fean, The Village Voice, and Discover, among others. Jackson likes to focus on the broader ramifications of the gaming industry—issues such as responsible gambling, the effects of cryptocurrency, or crossover between gambling and esports. In an era of fake news and truthiness, Jackson tries as best he can to leave the opinionating to the talking heads and give as big a picture as possible to the reader.
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