First arrest made in latest insider-trading investigation
The government made the first arrest in a broad investigation of alleged insider trading on Wall Street, charging an employee of a California research firm used by hedge funds.
Don Ching Trang Chu was arrested at his home in Somerset, N.J., and charged in federal court in New York with two counts of conspiracy to commit fraud. He was released on a $1-million bond.
A complaint filed by prosecutors says Chu helped hedge funds get inside information on publicly traded companies by connecting the funds with employees of the firms.
One of the companies where Chu had contacts was Irvine-based Broadcom Corp., a leading maker of semiconductor chips used in iPhones and other wireless products, according to the complaint.
Prosecutors allege that a Broadcom employee in Taiwan provided information about the company’s revenue before the results were publicly disclosed.
The complaint says Chu also connected hedge funds with employees of Atheros Communications Inc. in San Jose and Sierra Wireless Inc., a Canadian firm. Broadcom, Atheros and Sierra are not charged in the complaint. Representatives of the firms couldn’t be reached for comment.
The arrest, which followed FBI raids Monday of the offices of three hedge funds, does not signify the end of the investigation, prosecutors indicated.
Chu worked on the East Coast for Primary Global Research, which is based in Mountain View, Calif.
On its website the research firm says it can provide investors with access to “a world-class, global network of industry professionals, selectable by experience, perspective and location across eight industry sectors.”
That network of experts, the website says, gives “institutional investors and analysts a strategic advantage when making investment decisions.”
The site describes Chu as the firm’s “bridge to Asia experts and data sources” and “just a fun person to travel with on the highways and byways of Taiwan.”
A spokesman for Primary Global said the firm had “severed its relationship” with Chu but declined to comment on the charges against him.
Jeffrey Plotkin, a lawyer representing Chu, also declined to comment.
The complaint says the charges against Chu were built with the cooperation of Richard Choo-Beng Lee, a former employee of San Jose hedge fund Spherix Capital, who last year pleaded guilty to securities fraud in a separate case. Before joining Spherix, Lee worked for SAC Capital Advisors, one of the biggest names in the hedge fund world and a recipient of a government subpoena Monday.
Chu promised to set up meetings for Lee in Taiwan with employees from Broadcom and Sierra Wireless, the complaint alleges. When Lee asked Chu whether those consultants would provide numbers as good as those provided by an earlier Broadcom employee, the complaint says Chu told him, “All depends on the person.”
“Some guys willing to talk, some are not.”
The complaint indicates that Chu told Lee he was “nervous” about some of the transactions and expressed concern that their conversations might be recorded.
Chu was arrested four days before he was scheduled to travel to Taiwan, the complaint says. If convicted, he could face up to 30 years in prison.
The complaint says an unidentified employee of a technology company participated in the conspiracy by providing Chu’s clients with non-public information about the firm, including sales and revenue numbers. The alleged co-conspirator received more than $200,000 for talking with Chu’s clients, the government filing says.