Ex-Capital Data One Analysts Are Defendants in SEC Insider Trading Lawsuit
The U.S. Securities and Exchange Commission is suing Nan Huang and Bonan Huang, two former Capital One data analysts, for insider trading. The regulator contends that the two of them used nonpublic data to trade in consumer retail companies’ shares before earnings and sales reports were issued. They allegedly used sales information that the credit card company had collected from millions of customers.
According to the SEC lawsuit, from 11/13 to 1/15 the two analysts made hundreds, perhaps thousands of keyword searches for sales information on at least 170 companies that are publicly traded. They had access to this data because part of their job was to serve as fraud investigators.
The Commission says that the two men knew how to examine the information to figure out whether a company’s sales were going up or down. From 1/12 to 1/15 Huang and Huang purportedly made $2.83 million via share trades, in some instances using call options and put options to make the trades. Stocks that they traded included those belonging to Apple. Capital One fired the two men earlier this month.
U.S. Attorney Preet Bharara Seeks Rehearing Regarding Ruling Overturning Hedge Fund Fraud Convictions
Manhattan U.S. Attorney Preet Bharara will ask for a rehearing of an insider trading case in which convictions were overturned. In the case, United States v. Newman, A United States Court of Appeals for the Third Circuit panel overturned the convictions of Level Global Investors hedge fund portfolio manager Anthony Chiasson and Diamondback Capital hedge fund portfolio manager Todd Newman. The panel cited a 1983 Supreme Court precedent that said remote tippees could only be held liable if they knew the original tipper and received “personal benefit” from said tippee. This could not be proven against the two men so the court dismissed the cases against them.
“Remote tippees” in insider trading cases are people that find out about material nonpublic data via an intermediary and not straight from the insider that was the original source of the information.
Judge Vacates Insider Trading Guilty Pleas
Just this week, a federal judge vacated guilty pleadings by Thomas Conradt, Daryl Payton, Trent Martin, and David Weishaus. The four men pleaded guilty to trading on non-public data ahead of IBM’s agreement to purchase SPSS for $1.2 billion in 2009. A lawyer working on the deal gave them the information. He passed on the data to Martin but did not think that he would share the information with anyone else or use it for trading.
The men requested that their guilty pleas be withdrawn after the Second Circuit panel overturned the convictions of Chiasson and Newman. U.S. District Judge Andrew L. Carter Jr. granted their request.
Now, ex-Galleon Group trader Zvi Goffer is also saying that he will try to get his insider trading conviction, which came with a ten-year prison term, dismissed. Nicknamed the “Octopussy” while at that firm, Goffer is accused of having direct knowledge that tippers were benefiting and personally directing cash payments to them for giving over the material, non-public data.
U.S. regulators sue former Capital One employees for insider trading, Reuters, January 22, 2015
Insider trading convictions vacated, USA Today, January 22, 2015
Insider-Trading Defendants Allowed to Retract Guilty Pleas, The Wall Street Journal, January 22, 2015
More Blog Posts:
SEC Wants $602M Fund Set Up for Victims of SAC Capital’s Insider Trading, Stockbroker Fraud Blog, November 17, 2014
Ex-Ameriprise Manager Who Helped with SAC Capital Insider Trading Case Settles Charges Against Her, Institutional Investor Securities Blog, December 9, 2014
Texas State Securities Board Was Special Prosecutor in $1M Securities Fraud Case, Stockbroker Fraud Blog, January 22, 2015