NEW YORK (AP) — The Securities and Exchange Commission filed a civil lawsuit alleging insider trading Friday against the former chief financial officer of a San Francisco private equity fund and six others.
The suit claims that Chen Tang, of Fremont, Calif., gleaned nonpublic information through his job at an unidentified private equity fund and from his brother-in-law at a hedge fund that he and others used to reap illegal trading profits of more than $8 million.
"As the CFO of a private equity firm, Tang was entrusted with highly confidential and material information, and he violated that trust by misusing the information to generate enormous illegal profits," Rose Romero, who heads the SEC's Forth Worth, Texas, office, said in a statement.
The suit, filed in the U.S. District Court for the Northern District of California, says Tang, 39, passed insider information to his brother and four others, who used the tips to make bets through a variety of personal accounts and investment funds on shares of Tempur-pedic International Inc. and Acxiom Corp.
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In one instance last year, the SEC said, Tang learned that Tempur-pedic would be announcing that its quarterly earnings would fall short of forecasts. He passed the information to three friends who took short positions on the stock, betting that shares would fall. After Tempur-pedic made the announcement, its stock tumbled 37 percent, leaving Tang's friends with a profit of $1.2 million, the SEC says.
The agency also claims Tang received tips from his brother-in-law, Ronald Yee, a 39-year-old former CFO of hedge fund ValueAct Capital.
Yee allegedly passed along information in 2007 about his firm's impending bid for Acxiom that Tang, three of Tang's friends and his brother used to make $6 million in trading profits. The SEC said Yee did not make illegal trades on the information himself.
The SEC suit names as defendants three traders it says were acquaintances of Tang: Joseph Seto, Ming Siu and Zisen Yu. It also names his brother, James Tang, and Yee's brother, Eddie Yu.
The SEC suit does not provide contact information for the defendants attorneys and attempts to reach them Saturday were not successful.