USA TODAY International Edition
Want to get away with insider trading? Don’t do this ...
MIT scientist’s Internet search ultimately leads to fraud charges
If you hope to get away with illegal insider trading, it’s probably not a good idea to conduct Internet searches on how the Securities and Exchange Commission detects unusual trades.
Fei Yan, an engineering research scientist at the prestigious Massachusetts Institute of Technology, ignored this seemingly common- sense guideline as he allegedly reaped $ 120,000 in illegal profits by trading on secret information involving a pair of 2016 corporate mergers.
The 31- year- old Chinese citizen got the information from his wife, who was an associate at a law firm that worked on the deals, the SEC charged in a complaint filed last week. He then tried to hide the transactions by placing the trades through a brokerage account in the name of his mother, who lives in China, the complaint charged.
After flagging the trades as suspicious through data analysis, the SEC traced them back to Yan.
Subsequent investigation of Yan’s computer activity showed he conducted a 2016 Google searches for the phrases “how sec detect unusual trade” and “insider trading with international account,” the court complaint charged.
He subsequently visited Web pages about the Wall Street regulator’s “detection and enforcement efforts with respect to insider trading” and related to the SEC’s “insider trading enforcement actions with international dimensions,” the complaint alleged.
Joon Kim, the Acting U. S. Attorney for the Southern District of New York, said in a statement that Yan’s Internet searches included an article entitled “Want to Commit Insider Trading? Here’s How Not to Do It.”
Kim, whose office filed criminal charges of securities fraud and wire fraud against the research scientist, said the answer to Yan’s searches should have been clear: “There is no proper way to commit insider trading.”
Although Yan tried to hide his tracks, “we identified the profitable trades in deals advised by the same law firm and traced them back to him,” Joseph Sansone, cochief of the SEC’s Market Abuse Unit, said in a statement.
Yan was arrested last week at his home in Cambridge, Mass., and made an initial appearance in Boston federal court. He was released on a $ 500,000 unsecured bond pending his appearance in New York City’s Manhattan federal court.
The criminal filing identified Yan only as a post- doctoral associate at a major research university in Cambridge, Mass. But an MIT website lists him as a postdoctoral associate in the school’s research laboratory of electronics.
Yan’s mother, Rongxia Wu, was charged in the SEC case as a relief defendant — someone who allegedly has received illicit gains as the result of illegal actions by other defendants. Yan’s wife has not been charged.
Investigators said the insider trading transactions focused on Steinhoff International Holdings’ August 2016 acquisition of Mattress Firm Holdings and the December 2016 acquisition of Stillwater Mining by Sibanye Gold Limited.