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 The SEC said Chris Choi of San Jose, California will pay $30,000 to
settle civil charges that he shared confidential tips with a friend
who passed them on to a circle of hedge fund employees.
Choi is settling without admitting or denying the charges. His
lawyer declined to comment.
The Wall Street circle that benefited from Choi's tips included two
former portfolio managers, Todd Newman and Anthony Chiasson, whose
insider trading convictions are being examined by a federal appeals
court.
Another one of the portfolio managers who eventually received
information leaked from Choi was former SAC Capital employee Michael
Steinberg, who was convicted in December on criminal charges related
to insider trading.
The SEC's announcement came a day after a round of intense
questioning, as part of Newman and Chiasson's appeal, by judges on
2nd U.S. Circuit Court of Appeals in New York on whether recipients
of non-public information can be found guilty of insider trading
without any requirement prosecutors prove they knew the source of
the tip benefited from the disclosure.
Newman's lawyer questioned why Choi or the other source of inside
information in the case — an employee of the computer maker Dell — were never charged with wrongdoing.
The lawyer, Stephen Fishbein, called Newman and Chiasson's case "the
only one where the insider was not charged with anything."
The SEC said Choi is the 45th defendant to be charged, as part of a
probe into the activities of expert networks. A spokesman declined
to comment on whether there was any connection between the timing of
the settlement with Choi and the Newman and Chiasson appeal hearing.
The SEC's complaint against Choi said he passed information about
Nvidia's quarterly earnings to a friend, Hyung Lim, who in turn
received payments from an analyst who shared the information with
others.
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"Choi provided the material non public information to Lim, in breach
of the fiduciary duty that Choi, an employee of Nvidia, owed to
Nvidia, and did so with the expectation of receiving a benefit
and/or to confer a financial benefit," it said.
Stephen Crimmins, a partner at K&L Gates who is not involved in the
case, said Choi's settlement was unlikely to influence the outcome
of the pending appeal.
"This is the SEC typing up another aspect of this situation, but I
don't think it materially changes the inquiry that the 2nd Circuit
will go through as it resolves the Newman and Chiasson case," he
said. "The question is, will we require a showing that Newman and
Chiasson were aware that a benefit had been conveyed?"
The case is Securities and Exchange Commission v. Choi, U.S.
District Court, Southern District of New York, No. 14-2879.
(Reporting by Sarah N. Lynch in Washington and Emily Flitter in New
York; additional reporting by Nate Raymond in New York; editing by
Bernard Orr and Andre Grenon)
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