United States Attorney
Southern District of New York
Friday, September 28, 2012
Former Hedge Fund Research Analyst Pleads Guilty in New York Federal Court to Insider Trading Charges
NEW YORK – Jon Horvath, 42, of San Francisco, a former research analyst at a hedge fund in New York, pleaded guilty today in New York City federal court to charges arising from his involvement in a $61.8 million insider trading scheme, announced Preet Bharara, the U.S. Attorney for the Southern District of New York. The alleged scheme involved multiple analysts and portfolio managers at different hedge funds and investment firms who allegedly exchanged material, nonpublic information (inside information) about publicly traded technology companies, including Dell Inc. and NVIDIA Corp. Horvath was arrested and charged by complaint in January 2012, and was further charged in a superseding indictment in August 2012. He pleaded guilty before U.S. District Judge Richard J. Sullivan.
According to the superseding indictment to which Horvath pleaded guilty, statements made during the plea proceeding and other court documents:
Horvath was part of a circle of research analysts at different investment firms who obtained inside information from 2007 to 2009, both directly and indirectly, from employees who worked at public companies. The analysts, including Horvath, then shared the inside information with each other and with the hedge fund portfolio managers for whom they worked. For example, Horvath admitted receiving inside information concerning Dell and NVIDIA from other members of this circle of analysts, knowing that it came from employees at public companies, in breach of their duties of loyalty to their companies. Horvath then provided the inside information to the portfolio manager for whom he worked. Horvath caused trades in Dell and NVIDIA to b e executed based on the inside information he received from the circle of analysts. In exchange, Horvath provided the circle of analysts with inside information concerning other technology stocks that he obtained directly from public company employees.
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Horvath pleaded guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million or twice the gross pecuniary gain or loss derived from the offense. As part of his plea agreement, Horvath agreed to forfeit his share of the proceeds obtained as a result of the offenses. He is scheduled to be sentenced by Judge Sullivan on March 31, 2013.
Horvath was originally charged in January 2012 with three co-conspirators – Danny Kuo, Todd Newman and Anthony Chiasson. Kuo pleaded guilty in April 2012 to one count of conspiracy to commit securities fraud and two counts of securities fraud. He is scheduled to be sentenced by Judge Sullivan at a later date. Newman and Chiasson are scheduled for trial before Judge Sullivan on Oct. 29, 2012, and the charges against them are merely accusations. They are presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
These cases are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov .
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Antonia M. Apps, Richard C. Tarlowe and John T. Zach are in charge of the prosecution.