Cambridge, Massachusetts, Man Sentenced In Manhattan Federal Court For Insider Trading
Geoffrey S. Berman, the 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, was sentenced today in Manhattan federal court to 15 months in prison by U.S. District Judge Katherine B. Forrest. In 2016, YAN made almost $120,000 in connection with trading in stocks and options of publicly traded companies, based on misappropriated material nonpublic information.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Fei Yan blatantly circumvented the securities laws that are in place to deter people from doing exactly what he did – trading on nonpublic information to give him a leg up over other investors. Even after searching the internet on ways to get away with his crime, Yan was apprehended for his insider trading, and will now spend time in prison for his crimes.”
According to the Indictment filed in Manhattan federal court, previous court filings, and statements made a public court proceedings:
YAN’s spouse (the “Spouse”) 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, a publicly traded company whose shares are traded on the New York Stock Exchange under the symbol “SWC.” On August 25, 2016, in connection with the Spouse’s work at the Law Firm, the Spouse 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, the Spouse had access to material, nonpublic information regarding the potential acquisition.
The Law Firm required its employees, including the Spouse, to abide by a confidentiality policy, which prohibited disclosure of “information received from and about . . . clients . . . [and] other parties involved in transactions with clients.” In addition, YAN and the Spouse had a history, pattern, and practice of sharing confidences.
In early and mid-November 2016, the Spouse billed dozens of hours working on the potential merger between the Mining Company and Stillwater Mining, and YAN and the Spouse 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, the Spouse 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 YAN and the Spouse. 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 the Spouse continued to work on the transaction. On December 1, 2016, after a 78-minute phone call with the Spouse 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 the Spouse.
YAN and the Spouse also spoke on the phone multiple times on the night of December 5 and the early morning hours of December 6, 2016. Later on the morning of December 6, 2016, 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 the Spouse 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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In addition to his prison sentence, YAN, 31, was sentenced to three years of supervised release and ordered to forfeit $119,428.50, representing the amount of proceeds obtained as a result of trading in Stillwater Mining and related relevant conduct involving trades in the Mattress Firm.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities Exchange Commission, which has filed civil charges in a separate action. Mr. Berman 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.