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FBI arrest is blow against insider trading
By Larry Neumeister |
November 26, 2010, Friday
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Print Edition
Print Edition
THE first strike in a new federal offensive to root out insider trading on Wall Street came on Wednesday with the arrest of a consulting firm executive who prosecutors said tipped off a hedge fund manager about corporate earnings before they became public.
The arrest of Don Ching Trang Chu of Somerset, New Jersey, came when investigators realized he was heading to Taiwan on Sunday. He made the trip frequently, but authorities were apparently concerned that he was traveling ahead of what are expected to be multiple arrests in the probe and after he had been interviewed by FBI agents on Sunday.
Three hedge funds with offices in New York, Connecticut and Massachusetts were raided on Monday in the investigation, and on Tuesday, prominent mutual fund company Janus Capital Group said it had been subpoenaed. There was no indication Chu had dealt with those companies.
According to prosecutors, Chu told the FBI that employees of public companies sometimes meet in Taiwan with hedge funds and disclose contracts and revenue figures, weeks before the companies announce their earnings.
The complaint said some of the evidence against Chu resulted from conversations he had with Richard Choo-Beng Lee, a former hedge fund co-manager who has pleaded guilty and is cooperating with the government.
It said Chu in June 2009 appeared to provide secrets about the second quarter earnings of California chipmaker Atheros Communications to Lee prior to the public earnings announcement.
The charges against Chu grew from what prosecutors described as the largest hedge fund insider trading bust in history. Fourteen people have already pleaded guilty. Last year, the probe ensnared Raj Rajaratnam, a onetime billionaire and founder of Galleon Group funds, who is free on US$100 million bail.
The arrest of Don Ching Trang Chu of Somerset, New Jersey, came when investigators realized he was heading to Taiwan on Sunday. He made the trip frequently, but authorities were apparently concerned that he was traveling ahead of what are expected to be multiple arrests in the probe and after he had been interviewed by FBI agents on Sunday.
Three hedge funds with offices in New York, Connecticut and Massachusetts were raided on Monday in the investigation, and on Tuesday, prominent mutual fund company Janus Capital Group said it had been subpoenaed. There was no indication Chu had dealt with those companies.
According to prosecutors, Chu told the FBI that employees of public companies sometimes meet in Taiwan with hedge funds and disclose contracts and revenue figures, weeks before the companies announce their earnings.
The complaint said some of the evidence against Chu resulted from conversations he had with Richard Choo-Beng Lee, a former hedge fund co-manager who has pleaded guilty and is cooperating with the government.
It said Chu in June 2009 appeared to provide secrets about the second quarter earnings of California chipmaker Atheros Communications to Lee prior to the public earnings announcement.
The charges against Chu grew from what prosecutors described as the largest hedge fund insider trading bust in history. Fourteen people have already pleaded guilty. Last year, the probe ensnared Raj Rajaratnam, a onetime billionaire and founder of Galleon Group funds, who is free on US$100 million bail.
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