United States Attorney
Southern District of New York
Tuesday, June 26, 2012
Investment Research Firm President Pleads Guilty in New York to Insider Trading Charge
NEW YORK – Tai Nguyen pleaded guilty today in Manhattan federal court to one count of conspiracy to commit securities fraud and wire fraud in connection with an insider trading scheme in which Nguyen, the president of Insight Research LLC, an investment research firm, and a paid consultant of an expert networking firm, provided material, nonpublic information to members of the investment community, announced U.S. Attorney for the Southern District of New York Preet Bharara and Assistant Director-in-Charge of the New York Field Office of the FBI Janice K. Fedarcyk. The information concerned quarterly financial results for Abaxis Inc., a California biotechnology company. Nguyen secured the information from a family member employed in Abaxis’s Finance Department (the “Abaxis Insider”).
U.S. Attorney Bharara said, “Tai Nguyen was a consultant who, for a handsome fee, provided his clients with confidential and proprietary inside information in violation of the law. He also illegally traded on that information himself, earning a quick and easy profit, and exploiting the information for all it was worth. Today’s plea adds another to our nationwide roll call of those who choose to corrupt our markets. We will continue to go after individuals who flout the securities laws and see to it that they are prosecuted and punished.”
FBI Assistant Director-in-Charge Fedarcyk said, “Mr. Nguyen regularly provided material, non-public information to his clients before quarterly announcements in return for momentary financial gain. Providing and receiving inside tips not only damages the integrity and confidence of our markets, but violates the law. Securities fraud has been, and will continue to be, a major priority for this office until people throughout the hedge-fund industry and Wall Street understand that gaining an unfair advantage – like knowing the answers before the test – is cheating.”
According to the information and statements made during today’s guilty plea proceeding:
From 2006 through mid-2009, Nguyen obtained detailed information from the Abaxis Insider about the company’s anticipated revenues, earnings, gross margins and other financial results prior to the company’s quarterly announcement. After obtaining the Abaxis inside information, Nguyen provided it, on multiple occasions, to Noah Freeman, a research analyst at a hedge fund based in Boston and to Samir Barai, a portfolio manager at two separate hedge funds in New York, N.Y.
Freeman’s hedge fund earned more than $4.5 million between July 2006 and May 2009, while Barai’s hedge fund earned over $1.7 million between July 2008 and September 2009, as a result of Abaxis stock trading based on tips from Nguyen, including the Abaxis inside information. In exchange for the Abaxis inside information, Freeman’s and Barai’s hedge funds paid Insight Research and/or Nguyen consulting fees of several thousand dollars per month. At various times, Insight Research earned consulting fees of more than $15,000 a month from just one of these hedge fund clients.
In addition to passing the Abaxis inside information, on numerous occasions between 2006 and 2009, Nguyen used the information to trade Abaxis stock in his personal brokerage account. As a result of his own trading activity, Nguyen earned over $147,000 during that time period.
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Nguyen, 49, of Oregon City, Ore., pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud. This charge carries a maximum sentence of five years in prison and a maximum fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to persons other than the defendant resulting from the offense. As part of his plea agreement, Nguyen agreed to forfeit the proceeds of the offense.
U.S. Attorney Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the U.S. Attorney’s Office for the Southern District of New York’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney David I. Miller is in charge of the prosecution.