SEC Charges Technology Company Insider with Tipping Confidential Information Exploited by Hedge Funds (with Bondi Comment)

The SEC filed insider trading charges against a former accounting manager at Nvidia Corp. who allegedly tipped a friend with confidential information, which set in motion a chain of tipping and illegal trading among a network of traders at various hedge funds.

In the complaint, the SEC alleges that Chris Choi tipped his friend, Hyung Lim, with nonpublic information about Nvidia's financial performance in advance of the technology company's quarterly earnings announcements in 2009 and 2010. Mr. Lim is alleged to have then relayed the information to a fellow poker player, Danny Kuo, who was a hedge fund manager at Whittier Trust Company. Mr. Kuo then traded on the information on behalf of his firm and passed it along to analysts at other firms, including Diamondback Capital Management, LLC, Level Global Investors, LP, and Sigma Capital Management, LLC, which is an affiliate of S.A.C. Capital Advisors LP. The analysts then relayed the information to their portfolio managers who traded in Nvidia securities.

Bondi Comment: This enforcement action, brought by the Market Abuse Unit and the New York Office of the SEC, is another insider trading case that involves a large web of individuals. It illustrates how the SEC often investigates and pursues insider trading cases – starting first with enforcement actions against the tippees, then working its way to the initial tipper.

See: SEC Complaint.