Investment Research Firm President Sentenced In Manhattan Federal Court To One Year And One Day In Prison For Insider Trading Conspiracy Charge
Preet Bharara, the United States Attorney for the Southern District of New York, announced that TAI NGUYEN was sentenced today in Manhattan federal court to one year and one day in prison for conspiring to commit securities fraud and wire fraud in connection with an insider trading scheme in which NGUYEN, the president of Insight Research, LLC, an investment research firm, and a paid consultant of an expert networking firm, provided material, nonpublic information to members of the investment community. NGUYEN obtained the information which concerned quarterly financial results for Abaxis Inc., a California biotechnology company (the “Abaxis Inside Information”), from a family member employed in Abaxis’s Finance Department (the “Abaxis Insider”). He pled guilty in June 2012. NGUYEN was sentenced by U.S. District Judge Naomi Reice Buchwald.
Manhattan U.S. Attorney Preet Bharara said: “Tai Nguyen exploited a family member’s access to confidential and proprietary information to make a quick buck for himself, and to curry favor with others who could help his business. And now he is the latest in a long line of privileged professionals who has lost his liberty as a result.”
According to the Information and statements made during NGUYEN’s guilty plea and other court proceedings:
From 2006 through mid-2009, NGUYEN obtained detailed information from the Abaxis Insider about the company’s anticipated revenues, earnings, gross margins, and other financial results prior to the company’s quarterly announcements. On multiple occasions, NGUYEN provided the Abaxis Inside Information to Noah Freeman, a research analyst at a hedge fund based in Boston, Massachusetts, and to Samir Barai, a portfolio manager at two separate hedge funds in New York, New York.
As a result of NGUYEN having provided the Abaxis Inside Information, Freeman’s hedge fund earned more than $4.5 million between July 2006 and May 2009, and Barai’s hedge fund earned over $1.7 million between July 2008 and September 2009. In exchange for the Abaxis Inside Information, Freeman’s and Barai’s hedge funds paid Insight Research and/or NGUYEN consulting fees of several thousand dollars per month. At various times, Insight Research earned consulting fees of more than $15,000 a month from just one of these hedge fund clients.
In addition to passing on the Abaxis Inside Information to Freeman and Barai, NGUYEN used the information to trade Abaxis stock in his personal brokerage account on numerous occasions between 2006 and 2009. As a result of his own trading activity, NGUYEN earned over $147,000 during that time period.
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In addition to the prison term, Judge Buchwald sentenced NGUYEN, 49, of Oregon City, Oregon, to one year of supervised release. NGUYEN was also ordered to forfeit $400,000 and pay a $100 special assessment fee.
Freeman, 37, of Boston, Massachusetts, pled guilty in February 2011 to one count of conspiracy to commit securities fraud and wire fraud, and one count of securities fraud. He is awaiting sentencing.
Barai, 41, of New York, New York, pled guilty in May 2011 to one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, one count of wire fraud, and one count of obstruction of justice. He is awaiting sentencing.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission.
This case was 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. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney David I. Miller is in charge of the prosecution.