The unusual Toby Scammell insider trading saga ended yesterday when Scammell finally pleaded guilty to securities fraud that involved him making $192,000 by trading on inside information. Last month, Scammell also agreed to settle the SEC's civil case against him by paying over $800,000.

Back in August 2011, the SEC sued Scammell, alleging that he turned less than $5,500 into over $192,000 by trading in highly speculative call options in Marvel Entertainment, Inc. The SEC alleged that Scammell learned that Marvel was about to be being acquired by the Walt Disney Company by misappropriating non-public information from his then-girlfriend, a Disney intern who worked on the acquisition.

While all of the above is pretty standard fare for insider trading cases, it was Scammell's immediate response to the filing of the SEC's case that was quite novel. About a week after the SEC sued him, Scammell launched a website called "SECFAIL.com" which he used as his platform to denounce the SEC and its case. Going against the standard advice of white collar lawyers not to speak out about an ongoing SEC (and possible criminal) case, Scammell created SECFAIL.com on the blogging site Tumblr (he says it took him "about 5 minutes" to create) and started throwing haymakers at the agency suing him. SECFAIL.com is no longer up and running, but versions of it are still preserved at web.archive.org.

Among other things, Scammell wrote on SECFAIL.com that:

The SEC's complaint against him was so "riddled with omissions, distortions and inaccuracies that it's hard to know where to begin. To grab headlines the SEC has concocted an imaginative story that's not supported by the facts."

There was no evidence to suggest that he received material, non-public information, and the SEC was simply "making an illogical leap and assuming that I knew what my girlfriend knew." Based on that type of assumption, he said, "well-networked investors everywhere should be sued and embarrassed in the press, not for receiving information but merely for their relationships."

The SEC's timeline made no sense, his Google Web History proved hours of methodical Marvel-related research, etc.

The SEC didn't understand the difference between public and employee options. 

"If the SEC understood how to read a bank statement or how call options worked then I wouldn't be writing this. But this is the SEC—an incompetent government agency filled with bumbling lawyers who don't understand the first thing about the markets they're charged with regulating. They're the financial regulatory equivalent of the DMV, except their lawyers lack domain expertise. I have no doubt a random selection of TSA screeners and postal workers would do a better job if their only training involved watching an hour of CNBC."

And so on and so on, as duly-noted at the time by The New York Times, the WSJ, and elsewhere.

Despite his bluster on SECFAIL.com, Scammell went on to settle the SEC's case and appeared in federal court in Los Angeles yesterday to plead guilty to a one count of securities fraud. In his plea agreement, Scammell changed his tune, admitting that he learned about the acquisition and its timing through comments and his observations of his then-girlfriend.

Scammell is scheduled to be sentenced on July 28, 2014, and faces a maximum sentence of 25 years in federal prison. Reuters reports, however, that Scammell's plea agreement provides that prosecutors will recommend a term of no more than six months in prison followed by six months of home detention.

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