Insider-Trading Charge For Lawyer's Husband -- WSJ
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 13, 2017).
A research lab employee in Massachusetts was arrested Wednesday and charged with making illegal trades off nonpublic information provided by his wife when she was a law firm associate.
Fei Yan, a 31-year-old Chinese citizen, was charged by the Manhattan U.S. attorney's office with two counts of securities fraud and one count of wire fraud. He was arrested in the Boston area.
Mr. Yan worked as a postdoctoral associate at the Massachusetts Institute of Technology's electronics research lab, according to an MIT spokeswoman. It is unclear whether he is still employed there.
Federal prosecutors say Mr. Yan made more than $100,000 trading in options of Stillwater Mining Co., a Colorado-based mining company, ahead of its acquisition by South African miner Sibanye Gold Ltd. He allegedly knew secret details of the merger from his wife, who worked on the deal as an associate in the Manhattan office of Linklaters LLP, a large London-based law firm.
A spokeswoman for Linklaters said the associate, who is not identified in the complaint, has been suspended without access to the firm's systems and confidential information. She hasn't been arrested. The law firm says it is cooperating with authorities.
A spokesman for Sibanye declined to comment.
A lawyer for Mr. Yan couldn't immediately be identified.
In June 2016, Mr. Yan opened a brokerage account in the name of his mother and began trading Stillwater stock, the government alleges. The complaint details several calls from Mr. Yan to the brokerage firm and to his wife in the months before the acquisition.
On Nov. 22, 2016, hours after Mr. Yan's wife participated in a call on the potential deal, Mr. Yan's brokerage account bought call options in Stillwater, which is typically a bet that the price of the stock will increase. The account continued purchasing call options until the deal was announced, prosecutors said.
In a related complaint, the Securities and Exchange Commission alleged Mr. Yan also made around $9,700 in profits from illegal trades tied to the acquisition of Mattress Firm Holding Corp. by Steinhoff International Holdings. Steinhoff, like Sibanye, was being represented by his wife's law firm, according to the SEC.
Several of Mr. Yan's internet searches were documented in the complaint.
Three days before the public announcement of the deal, Mr. Yan allegedly searched for "how sec detect unusual trade" and accessed at least three articles about insider trading. In the next few days, prosecutors said he also searched for "insider trading with international account" and viewed an article entitled, "Want to Commit Insider Trading? Here's How Not To Do It."
Minutes after the deal was announced on the morning of Dec. 9, 2016, Mr. Yan's brokerage account sold all of its Stillwater call options, resulting in a profit of approximately $109,420, the complaint said.
That same day, Mr. Yan searched on the internet for "insider trading cases" and "insider trading options," prosecutors said.
Tips gleaned from law firm assignments have been used as the basis of several insider trading cases in recent years.
In May, federal prosecutors in Manhattan charged a former Foley & Lardner LLP partner with making illegal trades based on pending corporate announcements from firm clients, and with passing along tips to a neighbor to make trades of his own. The U.S. attorney's office is in discussions with the two defendants, Walter C. Little and Andrew M. Berke, about a possible disposition of the case, according to a court filing.
Earlier guilty pleas in insider-trading cases involving employees at Wilson, Sonsini, Goodrich & Rosati PC and Simpson Thacher & Bartlett LLP got widespread attention and served as a wake-up call for law firms that their internal systems may not be secure enough.
Write to Nicole Hong at nicole.hong@wsj.com and Sara Randazzo at sara.randazzo@wsj.com
(END) Dow Jones Newswires
July 13, 2017 02:47 ET (06:47 GMT)