FORMER RESEARCH ANALYST AT INVESTMENT FIRM PLEADS GUILTY IN MANHATTAN FEDERAL COURT TO INSIDER TRADING CHARGES
FOR IMMEDIATE RELEASE
Friday April 13, 2012
Kuo Passed Inside Information About Dell, NVIDIA, and Other Technology Stocks
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DANNY KUO, a former research analyst at an investment firm, pled guilty today in Manhattan federal court to his involvement in an insider trading scheme that included multiple analysts and portfolio managers at different hedge funds and investment firms and involved material, non-public information (“Inside Information”) about Dell, Inc. and NVIDIA Corporation, two publicly traded technology companies. Using the Dell Inside Information, KUO helped his firm avoid $78,000 in losses, and the firms where his co-conspirators worked realized profits of more than $61.8 million. KUO was arrested on January 18, 2012, and was indicted on February 7, 2012. He pled guilty before U.S. District Judge Richard J. Sullivan.
According to the Information to which KUO pled guilty, statements made during the plea proceeding, and other court documents:
Between 2008 and 2010, KUO worked as a research analyst for an investment firm headquartered on the West Coast, and was a member of a group of analysts at different investment firms and hedge funds who obtained Inside Information directly, or indirectly, from employees at publicly traded companies. KUO and the other analysts, then shared the Inside Information with each other and also with the hedge fund portfolio managers for whom they worked.
For example, in 2009 and 2010, KUO obtained Inside Information about NVIDIA, including revenue and gross margin information, in advance of the company’s public earnings announcements. KUO then passed the information to the group of analysts with whom he shared Inside Information, and to the portfolio manager for whom he worked. KUO obtained the Inside Information indirectly through a friend, in exchange for cash and other items of value. In 2008 and 2009, KUO also received Inside Information regarding Dell from another member of the group of analysts, and shared that information with the portfolio manager for whom he worked. The portfolio manager then executed securities transactions based in whole or in part on that information, thereby illegally earning profits and avoiding losses.
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KUO, 36, of Pasadena, California, pled guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. Each securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million. As part of his plea agreement, KUO agreed to forfeit the amount of proceeds obtained as a result of the offenses. He is scheduled to be sentenced by Judge Sullivan on October 15, 2012.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission.
These cases were brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
These cases are being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Antonia M. Apps, David S. Leibowitz, and Richard C. Tarlowe are in charge of the prosecution.