Investor’s Ritzy Habits Are Food for Thought for Insider Jury

Donald Blakstad, a San Diego investor facing federal insider-trading and investment-fraud charges, could learn his fate as soon as Monday in Manhattan, where a jury is deliberating the case.

Jurors will have to consider the government’s argument that Blakstad’s greed drove him to rip off investors and trade securities using inside information, and his defense that prosecutors highlighted his penchant for fancy cars and ritzy restaurants to make him look bad.

“They did that to make him hateful and ugly in your sight,” Blakstad’s laywer Eugene Iredale told the jury at the start of his closing argument Friday.

Blakstad is charged with five counts related to insider trading, and two counts tied to investment fraud. The government says he and his associates brought in about $6 million from the insider trading. Blakstad faces a maximum sentence of 20 years in prison if convicted of fraud, although actual sentences are generally lower.

During the trial, which lasted more than two weeks, the jury heard from a former employee at Illumina Inc. who said she tipped off Blakstad to information in company statements before their public release. Martha Patricia Bustos also told the jury about posh dinner parties Blakstad hosted at San Diego restaurants and a trip to Manhattan. Former NFL star Corey Liuget testified Blakstad sold him on a $150,000 investment over dinner at a swank steakhouse, and he hasn’t seen a penny of it since.

The jury also heard more than five hours of testimony from Blakstad himself, who said he didn’t trade on the inside information.

It also heard from a government witness who is set to bill the prosecution about $300,000 for a 122-slide analysis that traced money flows from investors, through different accounts, and eventually to expenditures, using a method Blakstad’s lawyer disputed.

“You cannot buy the truth,” Iredale told the jury Friday.

The defense against the investment fraud charges is simple, the attorney said -- Blakstad never told lies of material nature and did not steal money from his investors. The funds, he said, went toward a plan that would have given investors returns of several multiples of what they put in. His investors never filed formal complaints before they were approached by the government, Iredale said.

Using the Midcontinental Petroleum account for both personal and business expenses doesn’t make him guilty of investment fraud, Iredale said Monday, as he wrapped up his summation.

“Sloppy bookkeeping is not fraud,” Iredale said. “There was absolute good faith on Mr. Blakstad’s part.”

‘Total baloney’

Assistant U.S. Attorney Jared Lenow offered the government’s summations Friday, saying the underlying theme that connected the two buckets of allegations was “the defendant’s greed.” His Illumina trades, which were based on inside information, brought in millions of dollars, according to the prosecutor.

“What are the odds of that happening by pure luck?” Lenow asked.

Blakstad talked about the trading as betting, Lenow said. But without advance knowledge that an Oct. 10, 2016, earnings release was coming, “he wouldn’t have even known there was something to bet on,” the prosecutor said. Lenow compared it to betting on a Yankees game before the schedule was released.

Blakstad had testified he bought put options because he figured a rumored purchase of Illumina was going to fall through, a defense Lenow dismissed as “total baloney.”

Those rumors were circulating in August and there had been multiple articles saying the acquisition was unlikely, with the doubt factored into the share price, the prosecutor said.

“This is a ginned up excuse made for this trial -- it’s a lie,” Lenow told the jury.

The case is U.S. v. Blakstad, 19-cr-00486, U.S. District Court, Southern District of New York (Manhattan).

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