The government has made its first arrest in the widespread insider trading probe first reported by the Wall Street Journal over the weekend. Don Ching Trang Chu, an employee of an “expert-networking” firm, was charged with | Watch the video to the story: |
conspiring to promote the firm’s consultation services by arranging for insiders at publicly-traded companies to provide material, nonpublic information to the firm’s hedge fund clients for the purpose of executing profitable securities transactions, according to the United States Attorney for the Southern District of New York. Chu was scheduled to depart to Taiwan on November 28, according to the press release.
Chu was charged with one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud and fraud in connection with securities. He faces up to 25 years in prison on one count and five years in prison on the other count. He also faces a fine of $250,000 for each of the two counts.
The government said that in late 2008, Chu established a relationship with Richard Choo-Beng Lee, who at that time worked for a hedge fund.
The US Attorney said that around April 2009, Lee began to cooperate with the Government’s investigation, and he has since entered a guilty plea to charges of conspiracy and securities fraud.
In late 2008 and early 2009, Lee’s hedge fund was a client of Chu’s firm.
Lee is the founder and former president of California hedge fund Spherix Capital LLC and had worked for hedge fund giant SAC Capital between 1999 and 2004, according to published reports.
Neither the expert-networking firm nor any hedge funds were named in the indictment. The government said Chu’s firm’s main office is located in California, but maintains an office in New York City.
According to the indictment, Lee would have his employees call Chu’s firm before “the consultant’s company” was expected to release its quarterly earnings, “in part to obtain inside information.”
Lee paid Chu’s firm through soft dollars, which are payments that occur when a firm client causes its trading activity to be directed through the firm’s designated broker-dealer, and the commissions or fees from the executed trades would serve as payments for Chu’s services.
One such instance occurred on July 20 and 21, 2009, involving a publicly-traded technology company. According to the government, a currently unnamed person called CC-1 (co-conspirator 1) provided Lee with revenue numbers, average sales prices, unit sales for different product lines, gross margin figures, and revenue forecasts for the tech company. Later that day, the Company announced its quarterly earnings. Shortly after the tech company made its announcement, Lee called an employee at Chu’s firm and told him about Lee’s conversation with CC-1. “Lee said that CC-1’s revenue number was ‘spot on,’” according to the indictment.
The US Attorney also noted that around August 28, 2009, Chu told Lee in a phone call about another consultant who worked at Broadcom and who could provide “top line revenues” for Broadcom. Chu was scheduled to depart to Taiwan on November 28, according to the press release. Chu was charged with one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud and fraud in connection with securities. He faces up to 25 years in prison on one count and five years in prison on the other count. He also faces a fine of $250,000 for each of the two counts.
The government said that in late 2008, Chu established a relationship with Richard Choo-Beng Lee, who at that time worked for a hedge fund. The US Attorney said that around April 2009, Lee began to cooperate with the Government’s investigation, and he has since entered a guilty plea to charges of conspiracy and securities fraud. In late 2008 and early 2009, Lee’s hedge fund was a client of Chu’s firm. Lee is the founder and former president of California hedge fund Spherix Capital LLC and had worked for hedge fund giant SAC Capital between 1999 and 2004, according to published reports. Neither the expert-networking firm nor any hedge funds were named in the indictment. The government said Chu’s firm’s main office is located in California, but maintains an office in New York City. According to the indictment, Lee would have his employees call Chu’s firm before “the consultant’s company” was expected to release its quarterly earnings, “in part to obtain inside information.” Lee paid Chu’s firm through soft dollars, which are payments that occur when a firm client causes its trading activity to be directed through the firm’s designated broker-dealer, and the commissions or fees from the executed trades would serve as payments for Chu’s services. One such instance occurred on July 20 and 21, 2009, involving a publicly-traded technology company. According to the government, a currently unnamed person called CC-1 (co-conspirator 1) provided Lee with revenue numbers, average sales prices, unit sales for different product lines, gross margin figures, and revenue forecasts for the tech company.
Later that day, the Company announced its quarterly earnings. Shortly after the tech company made its announcement, Lee called an employee at Chu’s firm and told him about Lee’s conversation with CC-1. “Lee said that CC-1’s revenue number was ‘spot on,’” according to the indictment. The US Attorney also noted that around August 28, 2009, Chu told Lee in a phone call about another consultant who worked at Broadcom and who could provide “top line revenues” for Broadcom.
