Cambridge, Massachusetts, Man Pleads Guilty In Manhattan Federal Court To Insider Trading
Fei Yan Pleads Guilty to Insider Trading Charges Involving Trading Ahead of December 2016 Acquisition of Mining Company
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that FEI YAN, who works as a post-doctoral associate at a major research university in Cambridge, Massachusetts, pled guilty in Manhattan federal court to insider trading. In December 2016, YAN made approximately $110,000 in connection with trading in options to buy the stock of Stillwater Mining Company, based on misappropriated material nonpublic information. YAN pled guilty earlier today before U.S. District Judge Katherine B. Forrest.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As he admitted in Manhattan federal court today, Fei Yan made options trades based on inside information to net over $100,000 in illegal profits. Yan got the information from his spouse, whose position at an international law firm gave her access to confidential mergers and acquisitions secrets. Now Yan awaits sentencing before a federal judge for his crimes.”
According to the Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:
YAN’s spouse (“Spouse-1”) worked at the New York office of an international law firm (the “Law Firm”). In the summer of 2016, the Law Firm was retained by a mining company (the “Mining Company”) to represent it in negotiations to acquire Stillwater Mining Company (“Stillwater Mining”), a publicly traded company whose shares are traded on the New York Stock Exchange under the symbol “SWC.” On or about August 25, 2016, in connection with Spouse-1’s work at the Law Firm, Spouse-1 learned of the negotiations between the Mining Company and Stillwater Mining and continued to work on the transaction through December 9, 2016, when it was publicly announced for the first time that the Mining Company would be acquiring Stillwater Mining. While working on the transaction during the fall of 2016, Spouse-1 had access to material, non-public information regarding the potential acquisition.
The Law Firm required its employees, including Spouse-1, to abide by a confidentiality policy, which prohibited disclosure of “information received from and about . . . clients . . . [and] other parties involved in transactions with clients.” YAN and Spouse-1 had a history, pattern, and practice of sharing confidences.
In early and mid-November 2016, Spouse-1 billed dozens of hours working on the potential merger between the Mining Company and Stillwater Mining, and YAN and Spouse-1 were in frequent phone contact. During this period, YAN conducted Internet searches for “yahoo swc” and “stillwater merger,” even though the Mining Company’s potential acquisition of Stillwater Mining had not yet been publicly announced.
On November 22, 2016, Spouse-1 participated in a call at the Law Firm regarding the potential acquisition. That same day, YAN, using a brokerage account he had previously set up in his mother’s name, bought 71 options to buy Stillwater Mining stock. The next day, there were two phone calls between a phone used by YAN and a phone used by Spouse-1. After these calls, YAN bought an additional 200 options to buy Stillwater Mining stock.
Negotiations between the Mining Company, represented by the Law Firm, and Stillwater Mining continued to progress, and Spouse-1 continued to work on the transaction. On December 1, 2016, after a 78-minute phone call with Sposue-1 the night before, YAN purchased an additional 100 Stillwater Mining options.
The following day, YAN conducted multiple Internet searches and research related to mergers and acquisitions, including searches for “process of acquisition” and “company acquisition process.” Several minutes after conducting these searches, YAN called Spouse-1.
YAN and Spouse-1 also spoke on the phone multiple times on the night of December 5 and the early morning hours of December 6. Later on the morning of December 6, YAN bought an additional 341 options to buy Stillwater Mining stock. Later that day, YAN conducted internet research related to insider trading. For example, YAN searched for “how sec detect unusual trade” and accessed at least three articles on financial websites related to insider trading. YAN also searched for the name of an individual who was charged in this District in May 2016 with insider trading.
The next day, shortly after speaking with Spouse-1 on the phone for approximately 30 minutes, YAN conducted an Internet search for “insider trading with international account” and, shortly thereafter, viewed articles entitled “U.S. Insider Trading Enforcement Goes Global” and “Want to Commit Insider Trading? Here’s How Not to Do It.” The following day, YAN bought an additional 54 options to buy Stillwater Mining stock.
Early on the morning of December 9, 2016, it was publicly announced that the Mining Company would acquire Stillwater Mining for $18 per share. Beginning at approximately 9:33 a.m. Eastern time, minutes after the open of regular market trading. YAN sold the Stillwater Mining options he had previously purchased, resulting in a profit of approximately $109,420. Also that day, YAN conducted Internet searches for “insider trading cases,” and “insider trading options.”
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YAN pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. In addition, pursuant to a plea agreement with the Government, YAN agreed to forfeit $119,428.50, representing the amount of proceeds obtained as a result of trading in Stillwater Mining and related relevant conduct.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
YAN is scheduled to be sentenced by Judge Forrest on March 2, 2018, at 3:00 p.m.
Mr. Kim praised the investigative work of the Federal Bureau of Investigation (“FBI”) and thanked the SEC, which has filed civil charges in a separate action. Mr. Kim also thanked the FBI’s Boston Office and the U.S. Attorney’s Office for the District of Massachusetts for their assistance in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Brendan F. Quigley is in charge of the prosecution.