Accused of using the firm’s e-mail system so he could trade illegally in advance of client mergers.
The Securities and Exchange Commission has announced insider trading charges against a former Goldman Sachs employee accused of stealing non-public information in the firm’s e-mail system so he could trade illegally in advance of client mergers and make more than $450,000 in illicit profits. The SEC has obtained an emergency court order to freeze the assets of the trader and accounts he used to place the illicit trades.
The SEC alleges that Yue Han, who worked as an associate in Goldman’s compliance department and also goes by the name John Han, traded on confidential information contained in e-mails sent and received by Goldman investment bankers responsible for advising clients on impending merger and acquisition transactions. Han gained access to investment banker e-mails as part of his work developing surveillance software designed to monitor other employees for potential misconduct such as insider trading.
The SEC’s case stems from its Market Abuse Unit’s Analysis and Detection Center, which uses data analysis tools to detect suspicious patterns such as improbably successful trading across different securities over time. Enhanced detection capabilities enabled SEC enforcement staff to spot Han’s unusual trading activity in two different accounts.
''We allege that Han’s employer gave him access to confidential information so that he could help the firm detect and deter illegal activity, but he betrayed that trust by using the information for his own profit,” said Joseph G. Sansone, Co-Chief of the SEC Enforcement Division’s Market Abuse Unit. “Fortunately the SEC staff’s probing analysis uncovered Han’s suspicious trading and enabled us to obtain an asset freeze before he could dissipate his ill-gotten gains.”
According to the SEC’s complaint filed in federal court in Manhattan:
- Han began working at Goldman in late 2014 and was assigned to a group tasked with enhancing the firm’s ability to conduct electronic surveillance of its employees in order to identify insider trading and other misconduct.
- As part of his job, Han was given access to the e-mails of investment banking employees.
- Han exploited the information contained in these confidential e-mails to purchase securities, including “out of the money” call options, of at least four companies that were on the brink of being acquired: Yodlee Inc., Zulily Inc., Rentrak Corporation, and KLA-Tencor Corp.
- Han traded not only in his own account, but also in an account belonging to his father Wei Han, who lives in China.
The SEC’s complaint charges Yue Han with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as Section 14(e) of the Exchange Act and Rule 14e-3. Wei Han is named as a relief defendant in the SEC’s complaint for the purposes of recovering ill-gotten gains that Yue Han generated by trading in the account held in Wei Han’s name.