How 3 minor league baseball players made $200,000 from Del Taco insider trading, complaint says: A night out drinking with a Jack in the Box analyst

The three players, Austin Bernard, Jordan Qsar and Grant Witherspoon are related because Qsar, 28, and Bernard, 27, attended Pepperdine University together and Qsar and Witherspoon, 27, were both drafted by the Tampa Bay Rays in 2018 —Witherspoon in the fourth round. They became close friends and roommates, authorities said. Now, all three face a variety of charges related to conspiracy and securities fraud and face 20 years in prison and $5 million in fines, according to the U.S. Attorney’s Office for the Southern District of California. A fourth player, Chase Lambert, who was drafted by the Pittsburgh Pirates in 2018 and also attended Pepperdine with Qsar and Bernard, was named yesterday in a complaint to the Securities and Exchange Commission. The SEC said the team made nearly $200,000 from the illegal trade.

According to the SEC, outfielder Qsar returned home to San Diego in October 2021 during a hiatus from baseball. When he was there, he went out drinking with a friend he knew from Pepperdine and who worked in finance at Jack in the Box. At the time, the friend was working on the financial analysis for the California burger chain’s deal to buy Del Taco and talked about it with Qsar, the complaint says, which was not unusual because the two were neighbors and they often discussed romantic relationships and their finances. Qsar then purchased call options for Del Taco shares in mid-October and late November, betting that when news of the deal came out the share price would rise. Qsar also notified Bernard, a catcher, first baseman Witherspoon and second baseman Lambert. Those three then bought Del Taco’s call options, the agency said. Qsar texted Witherspoon and another Rays teammate, the SEC said, and the three began exchanging messages about buying Del Taco stock.

According to the complaint, Witherspoon texted Qsar and the other teammate: “look at this stock guys, Del taco, (sic) this graph looks bullish to me. I might try to bet on some options or something, I love eating at taco’s. The stock was at $8.74 per share at the time and Qsar replied: “I’m thinking about it too. The chart seems ready for a boom. What is the 52 week high?” Witherspoon responded: “$11.99. I could see it going to $10 easily.” Qsar responded: “If we break 10 new 52 week highs could follow. The payout could be ridiculous if we bought the January 2022 calls.”

The SEC said the messages were an attempt to obscure that they were buying the call options because of what Qsar had heard from his friend. Qsar didn’t know the timing of Jack in the Box’s deal to buy Del Taco, but he figured it would happen before the end of the year and that call options would be his best bet for the highest profits. A week after the texts, Qsar, Witherspoon and their teammate all went to baseball training camp in Florida. On October 15, 2021 in the training camp locker room, Qsar, Witherspoon and their teammate purchased the call options of Del Taco, Qsar for $465 and Witherspoon for $3,683. They both purchased a few more options later that week.

Later that month, Qsar texted Witherspoon that he was going to Los Angeles and riding with his friend from Jack in the Box. He texted four devil head emojis and wrote, “4 hour call.” Witherspoon responded, “It’s amazing.” Qsar replied: “Let’s hope for good, for good.” Qsar purchased more call options after the trip, the SEC said in the complaint. Qsar even joked with his Rays teammate about “catching a case” by investing their savings in the taco chain’s stock.

When Jack in the Box announced it would purchase Del Taco in December 2021, the stock price jumped 66%. Bernard, Lambert, Qsar and Witherspoon sold their options and made combined profits of $189,000 from the trades, the SEC said. Qsar earned $56,500; Witherspoon earned $42,800; Bernard earned $64,700; and Lambert earned $25,100.

The complaint shows that Qsar also lost his friendship with the Jack in the Box executive, who received a list of people who had traded Del Taco stock that included Qsar and Witherspoon, the SEC said.

“The system must be fair to everyone, or the market fails,” U.S. Attorney Tara McGrath said in a statement. “Those who seek to undermine this system for personal gain will face consequences.”

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