SAN FRANCISCO—A former San Francisco investment banker and his college friend both pleaded guilty today for their roles in an insider trading scheme involving two impending corporate mergers, announced U.S. Attorney Melinda Haag and Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.
Jauyo Lee, aka “Jason Lee,” 29, of New York, and Victor Chen, 29, of Sunnyvale, California, both pleaded guilty before U.S. District Judge Richard Seeborg in the Northern District of California to one count of conspiracy to commit securities fraud and one count of securities fraud. Lee and Chen were charged in a criminal information on March 21, 2013.
“Securities professionals cannot exploit their positions of trust to enrich themselves and their friends,” said U.S. Attorney Haag. “Those tempted to corrupt our markets in this manner should know the government will get to the bottom of suspicious trading and prosecute securities fraud vigorously.”
“Insider trading undermines ordinary investors’ faith in our financial markets, and the Justice Department has zero tolerance for it,” said Acting Assistant Attorney General Raman. “Today’s guilty pleas show that you cannot trade on inside information, pocket the profit, and expect to escape responsibility. Having now admitted their conduct, Mr. Lee and Mr. Chen must face the consequences.”
According to the plea agreements, Lee, who worked as an investment banker in the San Francisco office of Leerink Swann LLC, disclosed inside information to Chen, a friend from college, about two impending mergers involving Leerink clients. Between August 26, 2009 and September 5, 2009, Lee disclosed inside information to Chen about the merger of Leerink’s client, Syneron Medical Ltd., and Candela Corporation, a medical device company publicly traded on the NASDAQ stock market. Chen used the inside information to buy shares of Candela. After the merger was announced, Candela’s stock price increased more than 40 percent, and Chen sold his shares for a gain of approximately $62,589.
Between June 1 and 13, 2010, Lee also provided Chen with inside information about the impending merger of Somanetics Corporation and a subsidiary of Covidien plc. Leerink was the lead financial advisor to Somanetics, which also was publicly traded on the NASDAQ. Chen used the inside information to buy shares and options of Somanetics. Following the merger announcement, the price of Somanetics stock increased more than 30 percent, and Chen ultimately realized a profit of approximately $547,510.
Lee and Chen are scheduled for sentencing on July 23, 2013, before Judge Seeborg. The maximum penalty for conspiracy to commit securities fraud is five years in prison, and the maximum penalty for securities fraud is 20 years in prison.
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