The U.S. Securities and Exchange Commission (SEC) obtained a final judgment against Shaohua (Michael) Yin, a Chinese National, and partner at a Hong Kong-based private equity firm, for insider trading using five nominee accounts from addresses in Beijing and Palo Alto, California, as well as on a computer that also accessed Yin’s email accounts.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charged Yin with violating of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder – the anti-fraud provision of the federal securities laws under which the SEC charges illegal insider trading.
The amended complaint alleges that Yin received material, nonpublic information about a potential acquisition of DreamWorks Animation SKG, Inc. by Comcast Corp., and a potential announcement that Lattice Semiconductor Corporation was being acquired by Canyon Bridge Capital Partners, Inc. Yin received this information from Benjamin Bin Chow, a managing partner at China Reform Fund and a social acquaintance and former colleague of Yin at Warburg Pincus in Hong Kong. Acting on that information, Yin traded in those stocks, and following the public announcements, amassed illicit profits totaling more than $51 million.
In an effort to hide his insider trading activity from the SEC, Yin assisted six other people in establishing trading accounts (his father, mother, cousin, his children’s piano teacher, a friend and the friend’s cousin). He then conducted his securities trading through their accounts. Yin did not realize, however, that the nominees, in establishing those trading accounts, had to declare their financial status. In each case, their trading in the stocks of DreamWorks and Lattice was vastly disproportionate to their stated income, net worth, and the balance in their bank accounts – big red flags. As a result, the SEC subsequently froze the assets in their trading accounts to ensure that the illicit gains were available to satisfy a judgment. Each of the nominees were thus named as a relief defendant in the case, meaning that although they are not accused of violating the federal securities laws, they nonetheless had control of the accounts containing the illicit profits and that their continued retention of the funds would be unjust.
The court’s final judgment imposed a $39.5 million penalty on Yin, to be paid out of the frozen funds, and he is also permanently restrained and enjoined from violating of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Have You Been Charged with Insider Trading?
Insider trading defense lawyer David Chase, Esq. of the Law Firm of David R. Chase, represents individuals in SEC insider trading investigations around the nation. He has done so for twenty-five years after having served as Senior Counsel in the SEC’s Enforcement Division, where he investigated and prosecuted insider trading. If you are under investigation for insider trading and need strategic advice from an experienced SEC defense attorney, contact David at: 800-760-0912 or e-mail him at: david@davidchaselaw.com. Visit the Firm’s website for valuable content regarding SEC investigations, how to handle a SEC Subpoena, the Wells Notification process and the Firm’s prior successful SEC defense results at: www.securitiesfrauddefense.net.
