Former Investment Banker and His Associate Sentenced in Insider Trading Scheme | WPN World People News

A former San Francisco investment banker and his college friend were sentenced to 16 months in prison for their roles in an insider trading scheme involving two impending corporate mergers, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Melinda Haag of the Northern District of California.

Jauyo Lee, or “Jason Lee,” 29, of Palo Alto, California, and Victor Chen, 29, of Sunnyvale, California, both pleaded guilty on April 16, 2013, to one count of conspiracy to commit securities fraud and one count of securities fraud.

According to the plea agreements, Lee, who worked as an investment banker in the San Francisco office of Leerink Swann LLC, disclosed inside information to Chen, a friend from college, about two impending mergers involving Leerink clients. Between August 26, 2009 and September 5, 2009, Lee disclosed inside information to Chen about the merger of Leerink’s client, Syneron Medical Ltd., and Candela Corporation, a medical device company publicly traded on the NASDAQ stock market. Chen used the inside information to buy shares of Candela. After the merger was announced, Candela’s stock price increased more than 40 percent, and Chen sold his shares for a gain of approximately $62,589.

Between June 1 and June 13, 2010, Lee also provided Chen with inside information about the impending merger of Somanetics Corporation and a subsidiary of Covidien plc. Leerink was the lead financial advisor to Somanetics, which also was publicly traded on the NASDAQ. Chen used the inside information to buy shares and options of Somanetics. Following the merger announcement, the price of Somanetics stock increased more than 30 percent, and Chen ultimately realized a profit of approximately $547,510.

Lee and Chen were charged in a criminal information on March 21, 2013.

The sentence was handed down by U.S. District Judge Richard G. Seeborg of the Northern District of California. Judge Seeborg also sentenced Lee and Chen each to a two-year period of supervised release and ordered that restitution and forfeiture be considered at a subsequent hearing. Chen paid $610,099 in forfeiture prior to sentencing.

Source: U.S. Department of Justice