Insider Trading Roundup


Insider trading investigations did not take a holiday in August.  Fresh from their victory in the trial of hedge fund manager Doug Whitman, U.S. Federal prosecutors are getting ready for their next big insider trading trial, which will involve Level Global Investors LP co-founder Anthony Chiasson, ex-Diamondback Capital Management LLC portfolio manager Todd Newman and Jon Horvath, a former technology analyst at SAC Capital’s Sigma Capital Management LLC.  The trial is scheduled to begin October 29th.

Last week prosecutors filed new charges, expanding their complaints against the three.  The original charges in January accused them of being part of a “criminal club” of friends and co-workers who reaped almost $62 million from insider trading in Dell Inc. (DELL) shares.

The new charges introduce a new government witness, Danny Kuo, a former analyst at Whittier Trust Co., a South Pasadena, California-based wealth-management company.  Kuo, who was arrested with the defendants in January, pleaded guilty in April and agreed to cooperate with the government.  Prosecutors allege that Kuo knew an unnamed insider at Nvidia Corp. (NVDA) and passed information about the company’s financial results to the defendents, including revenues and gross margins, before quarterly earnings announcements.

Yesterday, the previously unnamed insider at Nvidia pleaded guilty.   Hyung Lim, a former executive at Broadcom Corp. (BRCM) and Altera Corp (ALTR), pleaded guilty to one charge of conspiracy to commit securities fraud and one charge of wire fraud.   He admitted he passed nonpublic information about NVIDIA Corp. (NVDA) to his friend, Danny Kuo.

Meanwhile, the U.S. Securities and Exchange Commission has not been idle.  Last week a district court in New Jersey has convicted hedge fund firm Clay Capital Management, LLC and its former Chief Investment Officer guilty for their roles in an insider trading scheme involving the securities of three companies Moldflow Corporation, Autodesk, Inc. and, Inc.  The Court ordered Clay Capital and Turner to pay $2.1 million in illicit gains. The complaint, filed by the US Securities and Exchange Commission, alleged that James F. Turner II traded in advance on leaked information about Autodesk’s planned acquisition of Moldflow.

The SEC also charged eight individuals living in the vicinity of Griffin, Ga., (about 40 miles south of Atlanta) with trading on nonpublic information about an upcoming company merger.  Local accountant Thomas D. Melvin, Jr. allegedly exploited confidential information from a client who was on the board of directors at Chattem Inc., a Tennessee-based pharmaceutical company known for such over-the-counter products as Allegra, Gold Bond, and Icy Hot.

In late 2009, after Chattem’s board was informed that French pharmaceutical manufacturer Sanofi-Aventis Inc. made a tender offer to purchase the company, Melvin’s client sought his professional advice on the financial impact of his Chattem stock options being involuntarily exercised due to a change in control of the company. Melvin breached his duty of confidentiality to the client and proceeded to tip four of his friends and associates about the likely increase in the company’s stock price as a result of the impending transaction. Those individuals then knowingly traded on the confidential information ahead of the public announcement of the merger, and some even tipped others who traded illegally as well.

Hello?  Don’t you know that regulators are monitoring trading in advance of merger announcements?

At the same time, insider trading investigations are going global.  As we reported earlier, Nomura Securities was accused by Japanese regulators of systematically leaking information about pending transactions.  Today Nomura announced it will cut $1bn (£630m) in costs as part of a bid to repair its balance sheet as tries to recover from the insider trading scandal.  Repeating the pattern of investment banking layoffs we discussed yesterday, Nomura said it planned to usher in the cuts by March 2014, chopping expenses from its wholesale division, which includes investment banking, equities and fixed-income businesses.

Lim’s guilty plea brings the head count to 67 insider trading guilty pleas and verdicts won by prosecutors in the office of U.S. Attorney Preet Bharara in Manhattan since August 2009.  For a complete list of individuals affiliated with research firms charged with insider trading, go to


About Author

Leave A Reply