Manhattan U.S. Attorney And FBI Assistant Director Announce Insider Trading Charges Against Spouse Of Lawyer At International Law Firm
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that FEI YAN, who works as a post-doctoral associate at a major research university in Cambridge, Massachusetts, was arrested this morning at his residence in Cambridge and charged with insider trading. 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 was presented earlier today in federal court in Boston, Massachusetts.
Manhattan U.S. Attorney Joon H. Kim said: “As alleged, Fei Yan repeatedly traded on confidential corporate information obtained from his spouse, a lawyer at an international law firm. Armed with confidential information about a corporate acquisition his spouse was working on, Yan allegedly traded on that information over and over again during a three-week period. As alleged, some of these trades followed online research Yan conducted on how to avoid law enforcement detection, including an article entitled ‘Want to Commit Insider Trading? Here’s How Not to Do It.’ The answer to Yan’s online inquiry should have been clear, there is no proper way to commit insider trading.”
FBI Assistant Director-in-Charge William Sweeney said: “The charges, as described today, present a very specific timeline of events in which Fei Yan allegedly traded on inside information acquired from his spouse, who worked for a law firm representing a mining company in the middle of a major acquisition. But, as we allege today, Yan dug too deep. Researching how to evade detection, Yan allegedly used an Internet search engine as an accomplice. But it doesn’t take much to understand the rules against insider trading, or how to break them.”
According to the Complaint filed today Manhattan federal court:
YAN’s spouse (the “Spouse”) worked at the New York office of an international law firm (the “Law Firm”). In the summer of 2016, a mining company (the “Mining Company”) retained the Law Firm to represent it in negotiations to acquire Stillwater Mining Company, a publicly traded company whose shares trade on the New York Stock Exchange under the symbol “SWC.” On or about 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, the date on which it was first publicly announced that the Mining Company was going to acquire 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 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 Law Firm call 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, YAN and the Spouse spoke twice. 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 previous evening, 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.”
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, YAN bought an additional 341 Stillwater Mining options. 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 by 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 Stillwater Mining options.
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, 31, of Cambridge, Massachusetts, is charged with two counts of securities fraud and one count of wire fraud. The securities fraud counts carry a maximum sentence of 20 and 25 years in prison, respectively, and a maximum fine of $5 million and $250,000 respectively, or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. 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.
Mr. Kim praised the investigative work of the FBI and thanked the SEC, which has filed a separate civil 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. He added that the FBI’s investigation is ongoing.
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.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
 As the introductory phase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.