Nvidia Workers Sued on Insider Trading Charges

The Securities and Exchange Commission on Monday sued 15 people--including 11 Nvidia Corp. employees--for alleged insider trading in shares of the graphics chip maker based on advance information that it would win a lucrative contract with Microsoft Corp.

According to the SEC, the 15 individuals racked up $1.7 million in illegal profits after buying shares in Nvidia (NVDA) in March 2000 on the basis of an e-mail circulated within the Santa Clara-based firm alerting staff that the company would supply graphics chips for Microsoft’s just-launched Xbox game console.

The employees--nine engineers, a human resources worker, a financial analyst and four friends and relatives--began buying shares March 6, the SEC charged.

The stock more than doubled in price in the trading that followed, soaring to $118, the SEC said. Microsoft said in a news release March 10 that it had selected Nvidia to design and manufacture the graphics for its game console.

The SEC is seeking a return of the profits from the alleged insider trading, as well as civil penalties of as much as three times the amount of those profits.

The SEC said it already had reached settlements with two of the defendants in the lawsuits filed in U.S. District Court.

Nvidia spokesman Derek Perez said the 11 employees named in the SEC suits have been placed on leave.

Nvidia shares, which closed down $1.15 at $51.34 on Monday, are up more than 220% this year.