UPDATE 1-Canadian sues SEC to stop Herbalife insider trading case

Mon Oct 20, 2014 5:46pm EDT
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(Adds details from complaint, background on similar claims, case citation, byline)

By Jonathan Stempel

NEW YORK Oct 20 (Reuters) - A Toronto man accused by the U.S. Securities and Exchange Commission of insider trading in Herbalife Ltd on Monday sued the federal regulator to stop it from pursuing its case.

In a complaint filed in Manhattan federal court, Jordan Peixoto said the SEC "intentionally and strategically" singled him out by pursuing an administrative proceeding to force a settlement, rather than sue him in federal court.

He also said the SEC case violates the U.S. Constitution because of how administrative law judges are appointed.

"The administrative process is a star chamber where only the Commission emerges as the victor and the defendant is defenseless," said Peixoto, who seeks a permanent injunction against the SEC. He also denied wrongdoing.

SEC spokesman John Nester declined to comment.

In a Sept. 30 complaint, the SEC alleged that Peixoto made $47,100 in December 2012 by trading illegally in Herbalife put options, after his friend Filip Szymik shared news that hedge fund manager William Ackman was about to reveal a big, bearish bet against the diet supplement company.

Szymik had allegedly learned of the $1 billion bet from his roommate, an analyst at Ackman's Pershing Square Capital Management LP. Peixoto was at the time an analyst at the accounting firm Deloitte & Touche.   Continued...