Former Investment Banker And His Associate Sentenced To 16 Months In Prison For Insider Trading Scheme
SAN FRANCISCO - A former San Francisco investment banker and his college friend were sentenced yesterday to 16 months in prison for their roles in an insider trading scheme involving two impending corporate mergers, announced U.S. Attorney Melinda Haag and Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.
Jauyo Lee, aka “Jason Lee,” 29, of Palo Alto, Calif., and Victor Chen, 29, of Sunnyvale, Calif., both pleaded guilty on April 16, 2013, to one count of conspiracy to commit securities fraud and one count of securities fraud.
According to the plea agreements, Lee, who worked as an investment banker in the San Francisco office of Leerink Swann LLC, disclosed inside information to Chen, a friend from college, about two impending mergers involving Leerink clients. Between Aug. 26, 2009, and Sept. 5, 2009, Lee disclosed inside information to Chen about the merger of Leerink’s client, Syneron Medical Ltd., and Candela Corporation, a medical device company publicly traded on the NASDAQ stock market. Chen used the inside information to buy shares of Candela. After the merger was announced, Candela’s stock price increased more than 40 percent and Chen sold his shares for a gain of approximately $62,589.
In addition, according to the plea agreements, between June 1 and 13, 2010, Lee also provided Chen with inside information about the impending merger of Somanetics Corporation and a subsidiary of Covidien plc. Leerink was the lead financial advisor to Somanetics, which also was publicly traded on the NASDAQ. Chen used the inside information to buy shares and options of Somanetics. Following the merger announcement, the price of Somanetics stock increased more than 30 percent and Chen ultimately realized a profit of approximately $547,510.
Lee and Chen were charged in a criminal Information on March 21, 2013.
The sentence was handed down by The Honorable Richard Seeborg, U.S. District Court Judge. Judge Seeborg also sentenced Lee and Chen each to a 2-year period of supervised release and ordered that restitution and forfeiture be considered at a subsequent hearing. Chen paid $610,099 in forfeiture prior to sentencing. The defendants will begin serving the sentences on September 30, 2013.
This case is being prosecuted by Assistant U.S. Attorney Robert S. Leach and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section with the assistance of Rayneisha Booth and Mary Mallory. The prosecution is the result of a one-year investigation by the Federal Bureau of Investigation with substantial assistance from the Chicago Regional Office of the U.S. Securities and Exchange Commission.
This prosecution is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 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 more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.