New York, NY – Last week a Pasadena California-based wealth management company and its former fund manager, agreed to settle an SEC insider trading case involving three public technology company’s shares.
Background of the Case
The portfolio manager, Victor Dosti, and his employer, wealth management firm Whittier Trust, was charged by the SEC with engaging in insider trading over a three-year period in shares of Dell Computer, Nvidia and Wind Systems.
The SEC said Dosti used nonpublic information from Dell and Nvidia employees to trade ahead of five earnings announcements between 2008 and 2010, and from an Intel Corp employee about the chipmaker’s talks to buy Wind River in 2009.
According to the SEC complaint, in 2008 a Dell employee passed information on upcoming quarterly earnings announcements through a New York-based investment adviser who had worked at Dell. The investment adviser passed the information on to an analyst at Diamondback Capital Management LLC. From there, the information was provided to Danny Kuo, a Whittier Trust fund manager who worked under Mr. Dosti. Mr. Kuo passed on the illicit information to Mr. Dosti.
“Time and again, Dosti received what he knew was inside information from Kuo and traded on it to generate illicit gains,” Sanjay Wadhwa, senior associate director of the S.E.C.’s regional office in New York, said in a statement.
In its complaint, the SEC said that Dosti generated illicit profits or avoided losses for Whittier in excess of $724,000 as a result of the insider trading in these three technology companies. As a result, Dosti and Whittier agree to pay $1.682 mln to settle the charges with the SEC.
Whittier agreed to payments totaling $1.523 mln, comprised of:
- Disgorge profits of $724,052
- Pay interest of $75,296 on ill-gotten gains
- Penalty of $724,052 equal to the amount of illicit profits.
Similarly, Dosti agreed to payments totaling $158,751, comprised of:
- Disgorge profits of $77,900
- Pay interest of $2,951 on ill-gotten gains
- Penalty of $77,900 equal to the amount of illicit profits.
In neither case did the defendants admit nor deny wrongdoing. The case is SEC v. Dosti et al, U.S. District Court, Southern District of New York, No. 13-03897.
Other’s Involved in the Scheme
Mr. Dosti is the latest person to settle insider trading allegations with the SEC who were purportedly part of an insider-trading ring involving junior-level analysts at a number of different investment funds.
The alleged insider-trading ring also included Todd Newman, a former portfolio manager with Diamondback, who was convicted and sentenced to 54 months in prison. It also included Anthony Chiasson, a former hedge-fund manager at Level Global Investors who was convicted and sentenced to 78 months in prison, and Jon Horvath, a technology analyst with SAC who pleaded guilty and is cooperating with the investigators.
Horvath said he shared the information about Dell and Nvidia with Michael Steinberg, a longtime SAC trader. Mr. Steinberg has pleaded not guilty and is scheduled to stand trial on Nov. 18.