Thu, 24/04/2014 - 10:17
The Securities and Exchange Commission has filed insider trading charges against a former accounting manager at Nvidia Corp, who tipped a friend with confidential company information that set in motion a chain of tipping and illegal trading among a network of hedge fund traders who reaped millions of dollars in illicit gains.
The SEC alleges that Chris Choi of San Jose, California, tipped his friend Hyung Lim with non-public information about Nvidia’s financial performance in advance of the technology company’s quarterly earnings announcements in 2009 and 2010.
Lim relayed Choi’s information to a fellow poker player Danny Kuo, who was a hedge fund manager at Whittier Trust Company.
Kuo illegally traded on the inside information for his firm and passed it along to analysts at such other firms as Diamondback Capital Management, Level Global Investors and Sigma Capital Management, which is an affiliate of S.A.C. Capital Advisors. The analysts relayed Choi’s information to their portfolio managers who caused funds to conduct insider trading in Nvidia securities.
Choi, who agreed to settle the SEC’s charges, is the 45th defendant charged by the SEC in its ongoing investigation into the activities of expert networks. The investigation has exposed widespread insider trading by investment professionals, hedge funds, and corporate insiders for illicit profits of approximately USD430 million. The SEC previously charged Choi’s tippees, including Lim as well as Kuo, Diamondback, and Level Global and Sigma Capital.
The investigation arose out of the SEC’s inquiry into Galleon Management and Raj Rajaratnam – a case in which the SEC has charged an additional 35 defendants whose insider trading generated illicit profits of more than USD96 million.
“Insiders at public companies who are entrusted with confidential information are duty bound to protect it,” says Sanjay Wadhwa, senior associate director of the SEC’s New York regional office. “Choi violated that sacred duty by regularly tipping his friend with non-public financial data that hedge fund traders exploited for millions of dollars in illegal profits.”
According to the SEC’s complaint filed in US District Court for the Southern District of New York, Choi’s illegal tips enabled hedge funds to reap approximately USD16.5 million in illicit profits and avoided losses. Choi routinely provided Lim with non-public information about Nvidia’s highly confidential calculations of its revenues, gross profit margins, and other financial metrics ahead of its quarterly earnings announcements.
Choi has agreed to pay a USD30,000 penalty and be barred from serving as an officer or director of a public company for five years. Without admitting or denying the allegations, Choi agreed to be permanently enjoined from future violations of these provisions of the federal securities laws. The settlement is subject to court approval.
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