Former Hedge Fund Research Analyst Pleads Guilty In Manhattan Federal Court To Insider Trading Charges
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JON HORVATH, a former research analyst at a hedge fund in New York, pled guilty today in Manhattan federal court to charges arising from his involvement in a $61.8 million insider trading scheme. The alleged scheme involved multiple analysts and portfolio managers at different hedge funds and investment firms who allegedly exchanged material, nonpublic information (“Inside Information”) about publicly traded technology companies, including Dell, Inc. (“Dell”) and NVIDIA Corporation (“NVIDIA”). HORVATH was arrested and charged by complaint in January 2012, and was further charged in a Superseding Indictment in August 2012. He pled guilty before U.S. District Judge Richard J. Sullivan.
According to the Superseding Indictment to which HORVATH pled guilty, statements made during the plea proceeding, and other court documents:
HORVATH was part of a circle of research analysts at different investment firms who obtained Inside Information from 2007 to 2009, both directly and indirectly, from employees who worked at public companies. The analysts, including HORVATH, then shared the Inside Information with each other and with the Hedge Fund portfolio managers for whom they worked. For example, HORVATH admitted receiving Inside Information concerning Dell and NVIDIA from other members of this circle of analysts, knowing that it came from employees at public companies, in breach of their duties of loyalty to their companies. HORVATH then provided the inside information to the portfolio manager for whom he worked. HORVATH caused trades in Dell and NVIDIA to be executed based on the Inside Information he received from the circle of analysts. In exchange, HORVATH provided the circle of analysts with inside information concerning other technology stocks that he obtained directly from public company employees.
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HORVATH, 42, of San Francisco, 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. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million or twice the gross pecuniary gain or loss derived from the offense. As part of his plea agreement, HORVATH agreed to forfeit his share of the proceeds obtained as a result of the offenses. He is scheduled to be sentenced by Judge Sullivan on March 31, 2013.
HORVATH was originally charged in January 2012 with three coconspirators - Danny Kuo, Todd Newman, and Anthony Chiasson. Kuo pled guilty in April 2012 to one count of conspiracy to commit securities fraud and two counts of securities fraud. He is scheduled to be sentenced by Judge Sullivan at a later date. Newman and Chiasson are scheduled for trial before Judge Sullivan on October 29, 2012, and the charges against them are merely accusations. They are presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the FBI. 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.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Antonia M. Apps, Richard C. Tarlowe and John T. Zach are in charge of the prosecution.