SEC Obtains Final Judgment Against Chinese National Charged with Insider Trading

A US District Court ordered a hedge fund manager to pay a civil penalty of $39.5 million for insider trading. 

According to the SEC's Complaint, filed in the US District Court for the Southern District of New York, the defendant engaged in a scheme to evade regulatory scrutiny by using brokerage accounts held in the names of five nominees. These nominees, including his elderly parents and other associates in Beijing, were ostensibly the holders of accounts controlled by the defendant. The SEC alleged that between April and November 2016, the defendant amassed significant positions in companies ahead of their acquisition announcements, reaping profits totaling over $36 million. The SEC alleged that the individual timed these trades to coincide with confidential merger negotiations, leveraging his inside knowledge to secure the gains.

The Court ordered (i) a permanent injunction from violating Exchange Act Section 10(b) ("Regulation of the Use of manipulative and deceptive devices") and Rule 10b-5 ("Employment of manipulative and deceptive devices") thereunder, (ii) pay a $39,500,000 civil money penalty and (iii) sell any remaining securities in the accounts of defendants.

The SEC had issued a judgment in 2022 against another individual alleged to be the source of material non-public information regarding the trades. In that Order, the individual was barred from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent or nationally recognized statistical rating organization. He had been previously convicted of criminal violations, including conspiracy to commit securities fraud and securities fraud, related to these trades.