Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 1 of 14
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`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF PENNSYLVANIA
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`Civil Action No. 22-cv-02317
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` Jury Trial Demanded
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`SECURITIES AND EXCHANGE
`COMMISSION,
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`v.
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` DAVID RODA and ANDREW LARKIN,
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`Plaintiff,
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`Defendants.
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`COMPLAINT
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`Plaintiff Securities and Exchange Commission (the “Commission”) files this Complaint
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`against Defendants David Roda and Andrew Larkin and alleges as follows:
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`SUMMARY
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`1.
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`This action alleges insider trading by David Roda and his childhood friend,
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`Andrew Larkin, based on confidential information Roda obtained while employed at Penn
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`Interactive Ventures, LLC (“Penn Interactive”), a subsidiary of gaming operator Penn National
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`Gaming, Inc. (“Penn National”).
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`2.
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`In the summer of 2021, in the course of his employment at Penn Interactive, Roda
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`learned that Penn National was involved in confidential negotiations to acquire Score Media and
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`Gaming, Inc. (“SCR”), a digital media and sports betting provider. Roda’s supervisor explicitly
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`warned him against trading on and sharing the information.
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`3.
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`Nevertheless, in the weeks and days leading up to the announcement of the
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`transaction, Roda purchased 500 short-dated, out-of-the-money SCR call option contracts.
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`4.
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`Additionally, Roda tipped his close friend Larkin about the transaction, directing
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`Larkin to download an encrypted messaging application so that they could “speak freely” about
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 2 of 14
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`their illicit trading. On the basis of the inside information that he obtained from Roda, Larkin
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`purchased 375 shares of SCR common stock.
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`5.
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`On August 5, 2021, Penn National and SCR announced that they had entered into
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`an agreement whereby Penn National would acquire SCR for approximately $2 billion in cash
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`and stock (the “Acquisition”). In response to the announcement, SCR’s stock price shot up
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`nearly 80%.
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`6.
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`7.
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`The same day, Roda and Larkin sold all of their SCR holdings.
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`Roda obtained illicit profits of approximately $560,762, while Larkin made
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`approximately $5,602.
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`8.
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`Following the announcement of the Acquisition, Larkin and Roda used the
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`encrypted messaging app to correspond about the profits they made from their unlawful trading.
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`Larkin mused that Roda could use the money he had made to purchase a beach house. Roda
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`responded, “ya if the SEC doesn’t come take it and put me in jail.”
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`9.
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`By engaging in the conduct described in this Complaint, Roda and Larkin each
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`violated, and unless enjoined will continue to violate, Section 10(b) of the Securities Exchange
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`Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R.
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`§ 240.10b-5].
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`JURISDICTION AND VENUE
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`10.
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`The Commission brings this action pursuant to Sections 21(d), 21(e), and 21A of
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`the Exchange Act [15 U.S.C. §§ 78u(d)–(e), 78u-1] seeking a final judgment that permanently
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`enjoins Roda and Larkin from engaging in the transactions, acts, practices, and courses of
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`business alleged in this Complaint and that orders disgorgement, prejudgment interest, civil
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`monetary penalties, and such other and further relief the Court may deem just and appropriate.
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 3 of 14
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`11.
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`The Court has jurisdiction pursuant to Sections 21(d), 21(e), and 27 of the
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`Exchange Act [15 U.S.C. §§ 78u(d)–(e), 78aa].
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`12.
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`Defendants, directly and indirectly, have made use of the means or
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`instrumentalities of interstate commerce or of the mails in connection with the transactions, acts,
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`practices, and courses of business alleged herein.
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`13.
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`Venue is proper pursuant to Section 27 of the Exchange Act [15 U.S.C. § 78aa],
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`because certain of the acts, practices, and courses of business constituting the alleged violations
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`occurred within the Eastern District of Pennsylvania. Both Roda and Larkin reside in this
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`District.
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`DEFENDANTS
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`14.
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`Roda, age 36, is a Philadelphia, Pennsylvania resident. During the relevant
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`period, Roda was employed as the Director of Backend Architecture at Penn Interactive.
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`15.
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`Larkin, age 36, is a Philadelphia, Pennsylvania resident.
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`RELEVANT ENTITIES
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`16.
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`Penn National is a Pennsylvania corporation headquartered in Wyomissing,
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`Pennsylvania and is an owner and provider of gaming, racing, and retail and online sports betting
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`operations. Its common stock is traded on the NASDAQ under the ticker PENN.
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`17.
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`Penn Interactive is a Delaware limited liability company with a principal place of
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`business in Wyomissing, Pennsylvania. Penn Interactive is a wholly-owned subsidiary of Penn
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`National and the entity through which Penn National operates its online sports betting operations.
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`18.
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`Score Media and Gaming is a British Columbia corporation headquartered in
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`Toronto, Ontario, Canada. SCR offers digital media and sports betting products. On October 19,
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`2021, Penn National acquired SCR for approximately $2 billion in cash and stock. Prior to the
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 4 of 14
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`Acquisition, SCR’s common stock was traded on the Toronto Stock Exchange and the NASDAQ
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`under the ticker SCR.
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`TERMS USED IN THIS COMPLAINT
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`Common stock is a form of equity ownership in a corporation.
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`Option contracts are financial instruments that offer the buyer an opportunity to
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`19.
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`20.
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`buy or sell—depending upon the type of option contract—an underlying asset such as stock.
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`21.
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`A “call option” is a contract that entitles the holder to purchase a security under
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`specified terms. The holder of a call option has the right, but not the obligation, to buy the
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`specified security at a set price (the “strike price”) on or before the expiration date for that
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`option.
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`22.
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`Generally, the holder of a call option benefits when the price of the underlying
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`stock increases. Thus, a trader might purchase a call option if he or she expects the underlying
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`asset’s price to exceed the strike price before the expiration date.
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`23.
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`A call option is considered “out of the money” when the current market price of
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`the underlying stock is lower than its strike price.
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`24.
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`A “limit order” is an order to buy or sell a stock or option at a specific price or
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`better. A buy limit order can only be executed at the limit price or lower. A limit order is not
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`guaranteed to execute.
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`FACTS
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`25.
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`Roda began working for Penn Interactive in July 2019, as a programmer for its
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`online sportsbook application. In June 2021, he was promoted to Director of Backend
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`Architecture. In this position, Roda continued his work as a programmer while overseeing a
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`group of other employees who were also working on the sportsbook application.
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 5 of 14
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`26.
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`Roda owed a duty not to use Penn Interactive’s or Penn National’s confidential
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`information for his own benefit or for the benefit of persons outside the company.
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`27.
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`Roda was subject to a Confidentiality, Non-Compete, and Non-Solicit Agreement
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`(the “Confidentiality Agreement”) that prohibited him from using “directly or indirectly for any
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`reason whatsoever” confidential information he obtained during the course of his employment.
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`The agreement listed information about “potential expansions and acquisitions” as an example of
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`confidential information he might obtain during his employment.
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`28.
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`29.
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`Roda understood his obligations under the Confidentiality Agreement.
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`Roda was also subject to Penn National’s Insider Trading Policy (the “Insider
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`Trading Policy”), which prohibited employees of Penn National and Penn Interactive “from
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`misusing material financial or other information that has not been publicly disclosed by the
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`Company.” The Insider Trading Policy provided that an employee could not “trade in or tip
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`others regarding securities of any other company [based on information] that was obtained in the
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`course of his or her involvement with the Company unless he or she is certain that he or she does
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`not possess any material non-public information about that company, such as information about a
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`pending acquisition.”
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`30.
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`Roda was aware of the Insider Trading Policy and generally understood that he
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`was not permitted to trade on the basis of material, non-public information he learned in the
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`course of his employment.
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`A.
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`Roda Learns That Penn National Is Pursuing SCR
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`31.
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`In March 2021, Penn National and SCR began discussing a potential transaction.
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`In late June 2021, Penn National informed SCR that it was willing to acquire SCR at a price of
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`$36 per share, subject to, among other things, conducting due diligence. Penn National and Penn
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`Interactive tasked a member of Roda’s group (“Employee-1”) with working on the due diligence.
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 6 of 14
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`32.
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`The project was highly confidential. Among other precautions that Penn National
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`and Penn Interactive took to maintain the confidentiality of the information, Penn National and
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`Penn Interactive limited the number of individuals who had access to information about the
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`Acquisition and used a code name for the Acquisition in order mask Penn National’s interest in
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`SCR.
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`33.
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`On July 1, 2021, Roda met with Employee-1 to discuss their work. At the
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`meeting and as part of their discussion about work, Employee-1 informed Roda that Penn
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`National was seeking to acquire SCR.
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`34.
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`The next day, July 2, 2021, Roda sought out more information. Roda contacted
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`his supervisor (“Employee-2”) to ask questions about Employee-1’s work and request that
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`Employee-2 add him to the due diligence team.
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`35.
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`Employee-2 told Roda that they would revisit the issue of adding him to the due
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`diligence team in a week, but that if Roda were added, he would be “on blackout.” That is, he
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`would be unable to trade because he would be in possession of material, non-public information.
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`B.
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`Roda First Trades SCR Options
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`36.
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`On the morning of July 7, 2021, Roda bought and sold several series of SCR call
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`options, ending the day holding 50 SCR call options.
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`37.
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`Specifically, Roda held 25 call options with a September 17, 2021 expiration date
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`and a strike price of $22.50 and 25 call options with the same expiration date, but a strike price
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`of $30.
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`38.
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`On July 8, 2021, Penn National and Penn Interactive added Roda to the due
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`diligence team for the Acquisition. In doing so, Employee-2 warned Roda about trading on, or
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`sharing, any confidential information he learned in the course of his work.
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 7 of 14
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`39.
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`Around the same time, Penn National’s Chief Legal Officer sent Roda an “over
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`the wall” email warning him that he was in possession of “material non-public information”
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`about the Acquisition and making clear that he was subject to the Insider Trading Policy.
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`40.
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`Shortly after his conversation with Employee-2, Roda sold the SCR options he
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`had purchased the day before. Roda lost approximately $1,600 on these trades.
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`C.
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`Roda Tips Larkin and Buys More SCR Options
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`41.
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`Roda and Larkin have been close friends since they were children growing up in
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`Lancaster, Pennsylvania. The two socialized together, played basketball together nearly every
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`week, and often discussed issues affecting their personal and professional lives.
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`42.
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`43.
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`On July 11, 2021, Roda saw Larkin at a party at a mutual friend’s house.
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`At the party, Roda told Larkin that Penn National was in talks to acquire SCR.
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`Roda shared this information with Larkin with the expectation that Larkin would trade on it.
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`44.
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`Larkin knew that the information Roda had provided to him was confidential,
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`market-moving information that Roda had obtained in the course of his employment and
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`improperly shared with Larkin. Larkin also knew that Roda had relayed the information to
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`Larkin for the purpose of having Larkin trade on it.
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`45.
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`The next day, July 12, 2021, Larkin texted Roda with questions about how call
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`options work. Larkin confirmed that he was “looking at options for the stock [they] talked about
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`at [the friend’s party].”
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`46.
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`Later that day, Larkin determined he did not have the ability to trade options in
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`his brokerage account, and so he purchased 375 shares of SCR common stock for $18 per share,
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`spending $6,750.
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 8 of 14
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`47.
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`That night, Roda sent Larkin a link to download an encrypted messaging app for
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`his phone. Roda instructed Larkin to “install this when you get a chance so we can speak
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`freely.”
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`48.
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`Using the encrypted messaging app, Roda and Larkin discussed ways Roda could
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`profit on the inside information he had obtained and not get caught, including by having Larkin
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`trade on Roda’s behalf.
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`49.
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`Ultimately, Roda decided to place more trades in his own account. On July 22,
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`2021, he purchased 100 SCR call options with an expiration date of August 20, 2021 and a strike
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`price of $17.50. He also purchased 100 SCR call options with an expiration date of September
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`17, 2021 and a strike price of $20. In making the two trades, Roda spent approximately $13,633.
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`50.
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`The 200 call options Roda acquired on July 22, 2021 were out of the money.
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`SCR’s stock price reached a high of $15.53 that day.
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`51.
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`On July 27, 2021, using the encrypted messaging app, Roda informed Larkin that
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`Penn National was looking to announce the Acquisition on August 5, 2021.
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`52.
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`On August 3, 2021, using the encrypted messaging app, Roda informed Larkin
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`that earlier that day he had a phone call with the head of Penn Interactive, who told Roda about
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`“things coming down the pike and big things in store,” which Roda told Larkin he understood to
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`be a reference to the Acquisition.
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`53.
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`After his phone call with the head of Penn Interactive, on August 3, 2021, Roda
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`attempted to purchase more SCR call options. Specifically, Roda entered a limit order to
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`purchase 200 SCR call options with an expiration date of August 20, 2021 and a strike price of
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`$25. The limit order expired unfilled.
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 9 of 14
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`54.
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`The same day, August 3, 2021, Larkin sought to add the ability to trade options to
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`his brokerage account.
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`55.
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`The next morning, August 4, 2021, at 10:26 a.m., using the encrypted messaging
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`app, Roda informed Larkin, “apparently we are announcing the score acquisition tomorrow.”
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`56. Minutes later, at 10:28 a.m., Roda entered and executed an order to buy 300 SCR
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`call options with an expiration date of August 20, 2021 and a strike price of $22.50. Roda spent
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`approximately $7,302 on the 300 SCR call option contracts.
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`57.
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`The 300 SCR call options that Roda purchased on August 4, 2021 were out of the
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`money. SCR’s stock reached a high of $18.20 that day.
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`58.
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`In total, between July 22, 2021 and August 4, 2021, Roda spent approximately
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`$20,935 to acquire 500 out-of-the-money SCR call options with expiration dates of August 20,
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`2021 and September 17, 2021 based on material, non-public information about the Acquisition.
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`59. Meanwhile, Larkin was waiting for approval to trade options in his brokerage
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`account. Ultimately, Larkin’s request was denied, and he made no additional purchases of SCR
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`securities beyond the 375 shares that he purchased on July 12, 2012 for approximately $6,750.
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`D.
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`Penn National and SCR Announce the Acquisition; Roda and Larkin Profit
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`60.
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`61.
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`On August 4, 2021, SCR’s share price closed at $18.14.
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`On August 5, 2021, before the markets opened, Penn National and SCR
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`announced that they had entered into an agreement whereby Penn National would acquire SCR
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`for approximately $2 billion in cash and stock.
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`62.
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`That day, SCR’s common stock opened at $29.55 per share, rose as high as
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`$33.22, and closed at $32.64, a nearly 80% increase from the prior day’s closing price.
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`63.
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`The same day, Roda and Larkin sold all of their SCR holdings.
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 10 of 14
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`64.
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`Using material, non-public information he had misappropriated from Penn
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`Interactive and Penn National, Roda turned the approximately $20,935 he spent on the 500 out-
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`of-the-money call options into approximately $581,697, netting profits of approximately
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`$560,762.
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`65.
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`Larkin, using Roda’s material, non-public information, turned the approximately
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`$6,750 he spent on 375 SCR shares, into approximately $12,352, for a profit of approximately
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`$5,602.
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`66.
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`Following the announcement, on August 5, 2021, using the encrypted messaging
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`app, Roda sent Larkin a screen shot of the value of the options he purchased. Larkin responded,
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`“Holy shit.” Unsatisfied with the illicit profits he had made, Roda responded that he “should’ve
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`gone harder.”
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`67.
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`In another message on August, 5, 2021, Larkin suggested that Roda could use the
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`money to purchase a beach house. Roda responded, “ya if the SEC doesn’t come take it and put
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`me in jail.”
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`E.
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`Roda and Larkin Violated the Federal Securities Laws
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`68.
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`At all relevant times, Roda owed a duty not to use Penn Interactive’s and Penn
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`National’s confidential information for his own benefit, including by trading on the basis of such
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`information or sharing such information with others so that they could benefit by trading on the
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`basis of such information.
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`69.
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`The information about the Acquisition was confidential. Penn National and Penn
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`Interactive established policies and procedures designed to protect such information and to
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`prohibit its employees from trading on such information.
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`70.
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`The information about the Acquisition was material. A reasonable investor would
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`have viewed information relating to the Acquisition, including the fact of Penn National’s pursuit
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 11 of 14
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`of SCR and the likely timing of the transaction, as being important to his or her investment
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`decision and/or significantly altering the total mix of information available to the public.
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`71.
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`Roda knew, or was reckless in not knowing, that the information he acquired
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`about the Acquisition was material, non-public information.
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`72.
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`Roda knew, or was reckless in not knowing, that he had a duty not to trade on the
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`basis of, or share, the material, non-public information about the Acquisition that he learned
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`during the course of his employment.
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`73.
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`In breach of his duty, Roda traded on the basis of, and shared with Larkin, the
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`material, non-public information about the Acquisition that he learned during the course of his
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`employment.
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`74.
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`75.
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`Roda had a close personal friendship with Larkin.
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`Roda received a personal benefit from disclosing to Larkin the material, non-
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`public information about the Acquisition that he learned during the course of his employment.
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`Roda shared the information with Larkin so that Larkin could trade in his own account for his
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`own benefit and trade on behalf of Roda for Roda’s benefit.
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`76.
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`Larkin obtained material, non-public information about the Acquisition from
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`Roda.
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`77.
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`Larkin knew, or was reckless in not knowing, that the information he acquired
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`from Roda about the Acquisition was material, non-public information.
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`78.
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`Larkin knew, or was reckless in not knowing, that Roda shared the information
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`with Larkin so that Larkin could trade in his own account for his own benefit and trade on behalf
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`of Roda for Roda’s benefit.
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 12 of 14
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`79.
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`Larkin knew, or was reckless in not knowing, that Roda had obtained the
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`information about the Acquisition during the course of his employment and was breaching a duty
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`by sharing the information with Larkin.
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`80. When Roda tipped the material, non-public information about the Acquisition to
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`Larkin, Larkin assumed Roda’s duty to keep the information confidential and to refrain from
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`trading on it. Larkin knowingly breached this duty by trading on the basis of the material, non-
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`public information he learned from Roda.
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`81.
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`Roda and Larkin, directly or indirectly, made use of the means and
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`instrumentalities of interstate commerce or of the mails in connection with the acts, transactions,
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`practices, and courses of business alleged in this Complaint.
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`CLAIM FOR RELIEF
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` Violation of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
`(Against Both Defendants)
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`82.
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`The SEC re-alleges and incorporates by reference the allegations in paragraphs 1
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`– 81, as if they were fully set forth herein.
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`83.
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`By engaging in the conduct described above, Roda and Larkin, directly or
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`indirectly, in connection with the purchase or sale of securities, and by use of means or
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`instrumentalities of interstate commerce, or the mails, or the facilities of a national securities
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`exchange, has, knowingly or recklessly:
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`a.
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`b.
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`employed a device, scheme, or artifice to defraud;
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`made an untrue statement of material fact or omitted to state material facts
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`necessary in order to make the statements made, in the light of the
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`circumstances under which they were made, not misleading; and/or
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 13 of 14
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`c.
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`engaged in an act, practice, or course of business which operated or would
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`operate as a fraud or deceit upon any person.
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`84.
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`By reason of the foregoing, Roda and Larkin have violated and, unless enjoined,
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`will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5
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`thereunder [17 C.F.R. § 240.10b-5].
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`PRAYER FOR RELIEF
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`WHEREFORE, the SEC respectfully requests that the Court enter a Final Judgment:
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`I.
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`Permanently restraining and enjoining Roda and Larkin from directly or indirectly
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`engaging in conduct in violation of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and
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`Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5];
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`Ordering Roda and Larkin to disgorge their ill-gotten gains and pay prejudgment interest
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`II.
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`thereon;
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`III.
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`Ordering Roda and Larkin to pay a civil penalty pursuant to Section 21A of the Exchange
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`Act [15 U.S.C. § 78u-1]; and
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`IV.
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`Granting such other and further relief as this Court may deem just, equitable, or necessary
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`in connection with the enforcement of the federal securities laws.
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`Case 2:22-cv-02317-JP Document 1 Filed 06/13/22 Page 14 of 14
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`Dated:
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`June 13, 2022
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`Respectfully submitted,
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`s/ Spencer Willig
`Gregory R. Bockin
`Julia C. Green
`Spencer Willig (NY Bar No. 4897443)
`Norman P. Ostrove
`U.S. SECURITIES AND EXCHANGE
`COMMISSION
`Philadelphia Regional Office
`1617 JFK Boulevard, Suite 520
`Philadelphia, PA 19103
`Phone: 215-597-3100
`Email: WilligS@sec.gov
`
`14
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