Insider Trading’s Odd Couple: The Goldman Banker and the NFL Linebacker
(Bloomberg Businessweek) -- When Mychal Kendricks darted past the Chicago Bears line earlier this month and sacked their quarterback, the Seattle Seahawks linebacker crawled across the turf, smacked it, leaped into the air, and twirled. Mics for the Monday Night Football game picked up a stretched-out scream of joy.
Two days later, in a Philadelphia courtroom 750 miles away, Damilare Sonoiki, a former Goldman Sachs banker, faced a judge and admitted he had leaked secrets about impending deals to the linebacker. The judge asked the 27-year-old why he was pleading guilty. “Because I guess I’m guilty,” he answered.
“You guess?” the judge asked. It was a moment of reckoning in a life of triumphs that would make the average Ivy League overachiever jealous. The Nigerian immigrant made it to Harvard, spent two years on an elite investment banking team at Goldman, left for Hollywood, got hired to write for The Simpsons, partied with Justin Bieber, and watched the rappers Drake and Meek Mill play ping pong.
“No,” he answered, according to the Philadelphia Inquirer. “Because I’m guilty.”
Kendricks, who had already pleaded the same, made $1.2 million from the insider trades, according to prosecutors. Sonoiki got football tickets and $10,000 in cash. When they’re sentenced in January, both will face millions of dollars in fines and 25 years in prison, though guidelines suggest something closer to three.
How they became this year’s odd couple of Wall Street crime—brought down by a scheme that won’t stand out in the annals of insider trading for being particularly smart or subtle—is a harder question to answer than the judge’s. Their resumes were golden. While Sonoiki was climbing from one elite world into another, Kendricks, raised by a single mother, was getting fawned over by fans like a slab of vintage Burt Reynolds. Rihanna once hinted she was nursing a crush on him.
A couple of stars from Goldman and the NFL blowing each other up might seem like a slapstick spectacle. But interviews with more than a dozen people reveal that what appeared to be immaculate success was perilous and fragile. Their lives weren’t as dreamy as they looked.
Sonoiki’s rise was almost as dramatic as his fall, according to childhood stories he told during his college years. He said his family moved from Nigeria to a tough neighborhood in Houston when he was six, and someone shot at their house. When he was 16, a friend passed around a pistol and twirled it like a toy. It went off, hitting Sonoiki in the arm.
A scholarship program brought him to a Virginia boarding school for the pampered sons of well-heeled families. At Harvard, he quickly joined the staff of the Lampoon, a humor magazine known as a pipeline to Hollywood writers’ rooms. Ivy League smart alecks tend not to be the kindest people, but Sonoiki’s abrasiveness stood out. Two women who asked not to be named called him dismissive and loud. “He was belittling,” says Owen Bates, a classmate who joined the magazine.
Sonoiki had a reputation for prodigiously aggressive networking. Peter Manges, a Lampoon cartoonist, recalls one party graced by Bill Murray: Sonoiki came late, walked up to the comedy legend, introduced himself, and left. “He was very much that kind of guy,” says Manges.
His Harvard classmates picked him to speak during their 2013 commencement ceremonies. Onstage, a friend introduced him as a rags-to-riches leader and future banker—and a guy who didn’t warn everyone when his pet snake was loose in the dorms for two weeks. “Don’t forget about us when you’re crashing world economies,” the friend said. Sonoiki took the microphone and told his classmates to follow their hearts.
The next day, students were handed their diplomas; Sonoiki didn’t get his. Several women had accused him of misconduct, including having sex with a student who was incapacitated, according to a person who asked not to be named. Sonoiki didn’t face charges and denied claims of misconduct in a phone interview with Bloomberg Businessweek. He says university systems that decide these cases disproportionately punish black students. A school spokeswoman says he never graduated and wouldn’t comment further.
That didn’t stop him from starting a dream job at Goldman Sachs—a bank packed with Harvard alumni—where he was tapped for a plum team that specializes in tech deals and media mergers. Two colleagues recall him as smart, talented, and quiet.
He became more anxious after the bank received an anonymous tip that he hadn’t graduated, according to the person who asks not to be named. “Sonoiki represented that he was working to resolve the issue,” says Goldman spokesman Michael DuVally, who won’t say whether the bank tried to investigate what happened at Harvard. Sonoiki might have thought he could thrive on Wall Street without a diploma, but that changed when a hedge fund made and took back a job offer in the middle of 2014.
By then, Sonoiki had added one more glittering name to his network.
Growing up in Fresno, Calif., Kendricks was the son of a former UCLA running back who hung on in Canada’s league without ever leaping to the big time. According to an account in the Los Angeles Times, Marvin Kendricks became addicted to crack cocaine, leaving his wife to raise their children on her own. He later cleaned up and reconciled with them.
In 2008, Mychal became a linebacker for the University of California at Berkeley. In one 2009 game, he scooped up a fumble at midfield and sprinted toward the end zone. As he neared the five-yard line, he glanced up at the scoreboard. A running back caught up and yanked him down. “It’s going to be haunting me,” he said afterward. Perhaps more keenly than his teammates, Kendricks knew how unseen perils had a way of sneaking up on stars. He vowed not to let it happen again.
After he was named the Pac-12 defensive player of the year, the Eagles picked him in the second round of the 2012 draft and signed him to a four-year contract for $4.4 million. The deal may have given him the aura of financial security, but the extreme violence of football means every player risks catastrophic injury on just about every play. Much of the money in contracts isn’t guaranteed, and the window when players can earn tends to last about three years.
During an interview for the Eagles website, Kendricks ticked through financial anxieties. You had to keep track of your bank accounts, he said, understand budgets, and monitor interest rates. “Growing up, you think a million is everything,” he said. “You get a million, and you understand that it can go like that.” He snapped his fingers.
Kendricks picked up side gigs, hooking up with a memorabilia company, starting apparel and food-delivery businesses, and promoting parties at night clubs. At one point, he was offered $16,000 to appear in a music video with a singer who said her name was Lucia Cole. They started talking about her rough childhood, and she eventually asked him to send selfies. Later, when she was revealed to be the invention of a serial con artist, Kendricks told BuzzFeed that his college training in social work had saved him from sending photos: “You understand how to keep barriers.”
Sonoiki first met Kendricks at a party in late 2013, according to filings by the Securities and Exchange Commission and the Justice Department that provide the basis for much of this account. They stayed in touch, trading business ideas. One Monday afternoon the following July, Sonoiki texted the linebacker: “Hit my line soon as you can,” he said. “Got something for us.”
“I might head out there tonight,” Kendricks wrote back.
They met hours later in the shadows of the Goldman Sachs skyscraper by the Hudson River in lower Manhattan. Three days later, Kendricks paid $850 for Sonoiki to take a luxury car to a nightclub in York, Pa. The next morning, at Kendricks’s apartment in Philadelphia, a Charles Schwab brokerage account was opened in his name and a note was written in his phone with four letters: CPWR. It was the stock symbol for Compuware Corp., a Detroit-based software maker and Goldman client; Sonoiki’s team was advising on a buyout.
The next week, after Kendricks deposited $80,000 in the new account, he texted: “Yo so the 80 is there.”
“Nah,” Sonoiki responded, as if they were talking about his Eagles jersey. “You should keep number 95.”
A few days later, they hung out on the set of Teyana Taylor’s music video for a song called Maybe. Kendricks was playing the hunky love interest. The next day, in his downtown Manhattan apartment, Sonoiki bought $22,000 worth of Compuware call options—a way of betting the price would go up—for the athlete’s account. Then he bought $30,000 more.
That’s not a great idea for anyone who wants to get away with insider trading. Making such a trade so close to a takeover is like trying to rob a bank a few doors from a police station, because the suspicious timing and staggering profits are red flags to investigators who comb through stock-market transactions. The brokerage even emailed Kendricks to warn him someone in New York was trading in his name, but Sonoiki bought an additional $8,000 anyway.
On the outside, Kendricks exuded confidence. In August 2014, he posted a photo of Rolls-Royce keys to Instagram. Inside, he was roiling with doubt.
“I’m getting scared Bruh,” he texted Sonoiki.
“Bro, don’t get scared,” the banker wrote back.
“I’m at a messed up place as far as my money is concerned,” the athlete texted. It was after midnight. “I don’t have enough money to buy a business and get the tax breaks I need.”
Sonoiki sounded calm. “I should have some good news for you really soon,” he texted at the end of the month. When it was reported a day later that Compuware was in talks to go private, its stock spiked, Sonoiki sold the options, and Kendricks made about $78,000.
“You the man,” Kendricks wrote.
A few weeks later, Sonoiki asked for tickets and an “envelope.” After the Eagles squeaked out a win against the Redskins, Kendricks paid him about $6,000 in cash. They moved onto other Goldman-linked deals, making $279,000 on the real estate website company Move Inc., $489,000 from the digital ad firm Sapient Corp., and $352,000 on a California equipment company called Oplink Communications Inc. In October, the linebacker met the banker at Philadelphia’s art deco 30th Street Station to hand over $4,000 in cash.
Prosecutors say the pair sometimes used a middleman to make trades. A lawyer for Kendricks said in court it was a former roommate named Christian Ramsey who sometimes sent messages to Sonoiki on the athlete’s behalf. Ramsey describes himself on LinkedIn as a “life hacker,” “raw vegan,” “affective deep learning researcher,” and the conductor of “a long-term ethnographic study on players in the NFL.” He did not respond to requests for comment and has not been charged.
The scheme didn’t last long. In the summer of 2015, Kendricks signed a four-year contract extension that guaranteed more than $16 million. Meanwhile, Sonoiki got a call from an agent about writing for the primetime ABC show Black-ish. Sonoiki spoke with Kenya Barris, the sitcom’s creator, and ended up with an offer to join its writing staff. A year after missing out on the hedge fund job, Sonoiki quit Goldman and moved to Los Angeles.
At the end of a 2016 podcast interview about his career trajectory, the host of Dreams in Drive asked him to name a tool he values. “Ambition, I guess,” Sonoiki said. “Not at all costs, obviously.”
This year, three months after Kendricks helped the Eagles win their first Super Bowl, the team released him to save money. He signed with the hapless Cleveland Browns, who gave him a one-year contract, then cut him when the charges hit. The NFL suspended him but said he could play while he appeals the league’s decision, and the linebacker-starved Seahawks quickly added him.
“I deeply regret it,” Kendricks said in a statement. “I invested money with a former friend of mine who I thought I could trust and who I greatly admired. His background as a Harvard graduate and an employee of Goldman Sachs gave me a false sense of confidence.” If his explanation is true, that wasn’t his only mistake. His lawyers say he didn’t end up with the money: All of the $1.2 million was squandered by an unnamed co-conspirator, who traded it away.
On the phone, Sonoiki sounds repentant. “I would like to apologize to my family and close friends for putting them through this,” he says. “I look forward to moving beyond it.”
When a former Goldman colleague first heard about the charges, he was furious. Even if Sonoiki is guilty, the ex-colleague says, Wall Street gets away with more venal sins than some boneheaded insider trades. When the government threatens a quarter century in jail, he says, it’s because they want to make an example out of someone.
After bankers get busted, it can be tempting to think the reason their firms pull in billions of dollars every quarter is that they’re dens of lawless crooks. But Wall Streeters have a genius for waltzing along the border between what’s legal and what isn’t—without tripping. The best among them know how to have governments pick up that line and move it a few inches.
If Sonoiki gambled his freedom for what turned out to be $10,000, some football tickets, and one more celebrity friend, it has to be one of the worst trades in Wall Street history. You almost have to wonder what he could have done if he had stayed.
©2018 Bloomberg L.P.