>I see the SEC is prosecuting a married couple for allegedly making $600,000 through insider trading. In Jesse Livermore’s day, ripping off the public through insider trading was legal but that, thankfully, changed a long time ago. The greed that attracts people to insider trading will never change though.
In an emergency civil action filed in the US District Court for the Southern District of New York, the Commission charged Ruben Chen and his wife Jennifer Xujia Wang with using online brokerage accounts in Wang’s mother’s name, Zhiling Feng, to purchase securities of three companies on the verge of announcing they would be acquired. Wang and Chen used non-public information from Wang’s employer, Morgan Stanley, which was providing services in connection with the acquisitions.
The Commission’s complaint alleges that Chen and Wang funded and exercised control over Feng’s online brokerage accounts. When Feng’s first brokerage account was opened, it was funded with money from a checking account in Wang and Chen’s name. In addition, Feng, who lives in Beijing, China, did not access the two online brokerage accounts that were opened in her name on the days of the relevant trading. Rather, most of the logins to the brokerage accounts were from Internet Protocol addresses at ING and from Chen and Wang’s home in New Jersey.
The Court has issued a temporary restraining order which, among other things, freezes the defendants’ assets and orders repatriation of funds taken out of the United States.
The Commission’s complaint alleges that Wang and Chen obtained illegal profits of more than $600,000 by trading on the basis of material non-public information before the public announcements of three acquisitions:
- Morgan Stanley Real Estate’s (MSRE) December 19, 2005 announcement of its acquisition of Town & Country Trust;
- MSRE’s August 21, 2006 announcement of its acquisition of Glenborough Realty Trust; and
- Formation Capital, LLC and JER Partners’ January 16, 2007 announcement of its agreement to acquire Genesis HealthCare Corporation.
Since August 29, 2005, Wang has been employed as a Vice President of Morgan Stanley in a group that supported the Principal Transaction Group, which provides financing for MSRE potential acquisitions. Wang received documents via e-mail and had access to documents on a shared network drive, which demonstrated that the firm was providing financing on certain acquisitions before they were publicly announced.