x Abu Dhabi, UAESaturday 22 July 2017

Insider trading arrests in US, UK

Investigators arrest a consultancy executive who prosecutors allege tipped off a hedge fund manager on corporate earnings before they became public.

Don Ching Trang Chu, left, was released on bail after being charged with conspiracy to commit securities and wire fraud.
Don Ching Trang Chu, left, was released on bail after being charged with conspiracy to commit securities and wire fraud.

NEW YORK // Investigators in the federal offensive against insider trading on Wall Street have arrested a consultancy executive prosecutors allege tipped off a hedge fund manager on corporate earnings before they became public.

The arrest on Wednesday of Don Ching Trang Chu of Somerset, New Jersey, came when investigators discovered he was to leave for Taiwan - a trip he made frequently - this Sunday.

Mr Chu was interviewed by the FBI last Sunday.

On the other side of the Atlantic, two former Blue Index directors and a trader at the London derivatives broker were charged with insider dealing by the UK Financial Services Authority (FSA) in a separate investigation about claims they traded before seven merger announcements.

Blue Index's co-owners, James Paul Sanders and James Swallow, and senior trader Christopher Hossain, were among five people charged at a London police station yesterday, the FSA said.

A former employee, Adam Buck, and Mr Sanders's wife Miranda were also charged in the case.

Mr Sanders was charged with three counts of disclosing inside information, and along with Mr Hossain was accused of encouraging Blue Index clients to trade contract-for-differences related to two stocks.

Mr Hossain also faces a charge of insider dealing ahead of a merger announcement.

All five were released on bail and are scheduled to appear in court next month. Blue Index trading was halted after arrests were made in the investigation in May last year, the FSA said.

Kevin Robinson, a lawyer for the Sanders couple, not immediately return a call for comment. David Corker, a lawyer for Mr Swallow, declined to comment.

Back in the US, several arrests are expected in the investigation. Three hedge funds with offices in New York, Connecticut and Massachusetts were raided last Monday as part of the investigation and on Tuesday, the prominent mutual fund company Janus Capital Group said it had been subpoenaed.

There was no indication Mr Chu had dealt with those companies.

Prosecutors claim he told FBI agents employees of public companies sometimes meet in Taiwan with hedge funds and disclose contracts and revenue figures, weeks before the companies announce earnings.

The complaint said some evidence against Mr Chu came from conversations he had with Richard Choo-Beng Lee, a former hedge fund co-manager who has pleaded guilty and is co-operating.

The prosecutors claim that in June last year, Mr Chu appeared to provide secrets about the second-quarter earnings of the Californian chip maker Atheros Communications to Mr Lee before their public announcement.

Fourteen people have already pleaded guilty in what prosecutors claim is the largest hedge fund insider trading raid in history.

Investigators for Preet Bharara, the top federal prosecutor in Manhattan, have used wiretaps to listen in as executives bragged about how to get an inside advantage in securities markets.

A federal judge on Wednesday declared the wiretaps legal, despite objections by defence lawyers who said the taps were not authorised by law for insider trading cases.

The federal insider trading probe is aimed at industry analysts, experts and consultants who are hired for the edge they might provide in the trading of securities.

Mr Chu, 56, declined to comment after he was released on $1m bail following a brief appearance. His lawyer, James DeVita, said: "We will have an opportunity to present a defence and we'll pursue that."

Mr Chu, who became a US citizen in 1997, worked for Primary Global Research, which prosecutors said advertised as an independent financial research firm with consultants in a range of industries.

He was charged with one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud and fraud in connection with securities. The charges carry up to 30 years in prison.

* with agencies