Financial regulators on Tuesday charged a 56-year-old New Yorker with insider trading, saying the executive knew in advance that Foot Locker’s disappointing earnings would trigger a selloff in stock. In total, the executive made about $113,000, authorities said, and now must pay back double that amount, according to a pending plea agreement.
According to the Securities and Exchange Commission, Barry Siegel twice shorted the sneaker and apparel brand’s stock, once when he was a senior director of order planning and management and a second time after Foot Locker fired him in a round of layoffs at the company. Siegel had worked at the company for a combined two decades at the time, and authorities said he knew negative sales and inventory data would come up in earnings calls with investors.
According to the SEC’s complaint, Siegel sold 8,000 shares of Foot Locker stock in May 2023, just two days before the company announced its first-quarter earnings results. Typically, a short sale is a bet that a stock’s price will fall. An investor borrows shares at the current market price, hopes the stock price will drop, and buys back the same number of shares at the lower price and a profit. In Siegel’s case, the sneaker and sporting goods retailer’s stock fell 27% after its earnings release, before the market opened on May 19. As of 9:31 a.m. that day, Siegel reportedly made about $83,000 after buying shares to cover his short position.
His second trade came in August 2023, about a week after Foot Locker fired him, authorities said. Siegel shorted 3,000 shares before the company’s second-quarter earnings report, sending Foot Locker’s stock price down 28%. That time, Siegel made $30,132, the SEC said.
Founded in 1974 and known for big-name brands like Nike, Adidas, Puma and limited-edition kicks, Foot Locker has struggled in recent years amid declining store traffic, with the company announcing plans to close 400 stores by 2026. The plan is part of a vision to focus more on sneaker hype and experimental concept stores and move away from shopping malls.
Siegel has neither admitted nor denied the allegations and has agreed to repay the $113,000 he made from shorting the stock, plus interest, in addition to a $113,000 fine. He is also prohibited from serving as an officer or director of a public company.
An SEC spokesman declined to comment on the details in the press release. Siegel did not immediately respond to a request for comment.
This story originally appeared on Fortune.com
