Four men taking part in an illegal insider trading scheme between California, New Jersey, and Florida have been arrested and charged after earning approximately $3.2 million in illegal profits over three years.

The FBI has debunked the cross-country scheme and pinned the four men responsible. Steven Fishoff, 58, of Westlake Village, California, orchestrated the transactions. He owns Featherwood Capital, which he operated out of his home and used as a trading vehicle for the illicit transactions. Fishoff acted with three others: Ronald Chernin, 66, of Oak Park, California; Steven Costantin, 54, of Farmingdale, New Jersey; and Paul Petrello, 53, of Boca Raton, Florida. Fishoff and Costantin are brother-in-laws and the two others are close friends and longtime business associates of Fishoff.

Over the past three years, the defendants posed as institutional investors or portfolio managers to gain access to company information before it was made public. The defendants cold-called banks and deceptively associated themselves with legitimate investments funds. To gain access to the confidential information, the defendants would sign paperwork pledging not to disclose the information and not to act on it. This practice is often known as being “brought over the wall.” However, the defendants would quickly spread the information to one another and act on it.

After tipping each other off on the non-public information, the men would short the stocks before the information was made public, allowing them to make a profit once the shares declined. The four defendants would split the illegal profits. The illegal transactions were conducted through a deceptive account structure with accounts or trading entities that were controlled by the defendants.

The defendants took advantage of several companies, most recently Biogen Inc (NADSAQ:BIIB) and Sangamo BioSciences Inc (NASDAQ:SGMO). In January 2014, the defendants made $1.2 million by buying Sangamo shares when they found out the company was about to enter a licensing deal with Biogen. Shares of Sangamo rose 38% after the information was made public. According to TipRanks, three analysts currently have open Buy ratings on Sangamo with an average 12-month price target of $23.67, marking an upside of nearly 79% from where the stock is currently trading.

The defendants also received information from about 16 companies in total, including: Aeterna Zentaris, Inc.; Ampio Pharmaceuticals, Inc., Biodel Inc.; Lannet Company, Inc; and Synergy Pharmaceuticals, Inc.

U.S. Attorney Paul J. Fishman commented, “The defendants… were entrusted with confidential, nonpublic information about companies, and, time and time again, they allegedly violated that trust by illegally trading the companies’ stock for substantial profits. They allegedly rigged the game so they would always win, and their profits came at the expense of legitimate investors, who were not privy to this inside information.”

All four of the defendants were charged with one count of conspiracy to commit securities fraud, which is punishable by a maximum potential five year prison sentence and a $250,000 fine. Fishoff was charged with an additional substantive fraud charge, punishable by a maximum of 20 years in prison and a $5 million fine. Richard Frankel, FBI Special Agent in Charge, commented, “Insider trading is an investigative priority of the FBI. The FBI is committed to stopping insider trading and will hold those who perpetrate these schemes accountable because their illegal activities undermine the integrity of the U.S. financial markets and weaken investor confidence.”

This is a clear instance of illegal insider trading, though the term has a legal manifestation as well. Legal insider trading refers to corporate insiders, such as officers or board members, buying and selling stock of their own companies.