Golfer Phil Mickelson has agreed to give back $931,000 (€831,000) in profits he made from stock trades as US authorities pursue insider trading charges against a famous sports gambler and a former director of Dean Foods.

William "Billy" Walters, a golf-course owner and leading figure in the sports-betting industry, was charged with gleaning non-public information about the food and dairy company's earnings and its plans to spin off an organic food line from Thomas Davis, his friend and former Dean Foods chairman.

By trading in advance of company announcements from 2008 to 2014, Mr Walters made $32 million in profits and avoided $11 million in losses, according to a federal indictment.

Gambling debts

In phone calls and text messages, Mr Walters urged Mr Mickelson, a three-time Masters winner, to buy shares in Dean Foods ahead of the spin-off, according to the Securities and

Exchange Commission

.

Mr Mickelson, who had never owned shares of Dean Foods before, had gambling debts to Mr Walters at the time of the trade, authorities allege.

When news of the spin-off was announced, Dean’s stock rallied 40 per cent and Mr Mickelson made $931,000 in profits. Mr Walters allegedly made more than $17.1 million in profits from that trade.

"We've charged Mr Mickelson made profits as a result of the illegal conduct of Mr Walters, and thereby should have to . . . give back that money," said Andrew Ceresney, the SEC's director of enforcement.

“When you make money you’re not entitled to, you shouldn’t keep it.”

Charging documents

Last year an appeals court narrowed the scope of insider trading law by finding prosecutors needed to prove that a person knew the information they received was obtained illegally.

In the charging documents there is no allegation that Mr Mickelson knew Mr Walters’s source.

Mr Mickelson said he felt “vindicated” that he had not been accused of wrongdoing and agreed to return the profits from the trades considered “questionable”. He said he appreciated that his sponsors had stayed with him during the investigation, which lasted more than two years.

Mr Walters was arrested on Wednesday night at a resort in Las Vegas. Barry Berke, his attorney, said that Mr Walters denied the charges.

Mr Davis pleaded guilty to securities fraud and perjury charges on Monday. – Copyright The Financial Times Limited