The Securities and Exchange Commission announced insider trading charges against a research scientist who allegedly searched the internet for “how sec detect unusual trade” before making a trade that the agency flagged as suspicious through data analysis.
The SEC’s complaint alleges that Fei Yan loaded up on stocks and options in advance of two corporate acquisitions late last year based on confidential information obtained from his wife, an associate at a law firm that worked on the deals.
According to the SEC’s complaint, Yan made approximately $120,000 in illicit profits by selling his holdings in Mattress Firm Holding Corp. and Stillwater Mining Company following public announcements that they would be acquired by other companies.
Yan allegedly attempted to conceal his illegal activity by placing the illicit trades in a brokerage account bearing the name of his mother, who lives in China. Among the internet searches he conducted was “insider trading in an international account.”
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Joseph G. Sansone, Co-chief of the SEC Enforcement Division’s Market Abuse Unit, said, “As alleged in our complaint, Yan attempted to evade detection by researching prior SEC cases against insider traders and using a brokerage account in a different name, but we identified the profitable trades in deals advised by the same law firm and traced them back to him.”
The SEC is seeking disgorgement of ill-gotten gains plus interest and penalties as well as permanent injunctions. The SEC’s complaint names Yan’s mother, Rongxia Wu, as a relief defendant for the purposes of recovering illicit profits in the brokerage account in her name.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Yan.
SEC Bars Advisor Who Bilked Former NBA Basketball Player Tim Duncan
The SEC announced that it has obtained a judgment and industry bar against Charles A. Banks IV, an Atlanta-based investment advisor charged with defrauding a former professional basketball player. In June, Banks was sentenced to prison.
According to the SEC’s complaint, Banks fraudulently induced retired NBA star Tim Duncan to invest $7.5 million in a sports team apparel and merchandise company based on a series of misrepresentations about the investment and allegedly misappropriated funds from his client.
On April 3, Banks pleaded guilty to wire fraud in the U.S. District Court for the Western District of Texas predicated on some of the conduct alleged in the SEC’s complaint. On June 28, Banks was sentenced to 48 months in prison and ordered to pay $7.5 million in restitution.
The SEC’s judgment, entered on July 5 by the U.S. District Court for the Northern District of Georgia, bars Banks from serving as an officer and director of a public company and orders Banks to pay disgorgement, prejudgment interest and a penalty with the amounts to be determined a later date upon a motion by the SEC. Banks also has consented to the entry of an SEC order that bars him from the securities industry.
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