A Boston jury sided with regulators last week in finding that restaurateur Charlie Chen engaged in insider trading that netted him more than $800,000.
According to a civil complaint filed by the Securities and Exchange Commission, Chen placed “extremely aggressive” and “extraordinarily profitable” trades in advance of Vistaprint quarterly earnings announcements from April 2013 through July 2014.
“Chen purchased options ahead of eight Vistaprint quarterly earnings announcements, each time correctly anticipating whether Vistaprint’s stock price would increase or decrease after those quarterly releases,” the complaint reads.
Investigators determined that Chen, 48, was being fed inside information via a friendship with “a VistaPrint insider and her husband,” court documents said. Chen also purchased options through an account in his wife Shui Foon Mok’s name, court documents said.
According to evidence presented at the trial, Chen made over $800,000 in illicit trading profits.
“The evidence at trial also showed that, upon being questioned by the FBI in 2016, Chen claimed that he did not know anyone who worked at Vistaprint and falsely denied having a close relationship with the Vistaprint insider and her husband with whom he and his family had vacationed,” the SEC said in a news release.
The jury found Chen liable on all counts, finding that he violated the antifraud provisions of the Securities Exchange Act of 1934, as well as violations of the Securities Act of 1933. The SEC seeks “up to three times” the amount of money Chen profited from his Vistaprint options, the release said.
Chen was previously acquitted of criminal charges of insider trading in April 2019.
Hawaii To Iceland
According to the complaint, Chen and his wife lived in the same town as the unnamed “Vistaprint Insider” and their children attended Sunday school together. The two families took vacations together, including to Hawaii in August 2013 and to Iceland and Copenhagen in June 2015.
The Vistaprint employee worked in the company’s Financial Planning and Analytics (FPA) group, “where she helped to compile corporate financial information that Vistaprint disclosed to the public on a quarterly basis,” the complaint said.
That information included, among other things, comparisons of actual and forecasted
revenues and earnings per share, which serve as an indicator of a company’s profitability, the complaint said.
Chen typically bought options that expired approximately three weeks after the quarterly earnings announcements, putting his entire options investment at risk if he were wrong, the complaint said. And Chen either purchased put or call options, court documents said, never both.
“Chen’s trading pattern in Vistaprint securities consisted of a series of high-conviction bets that would have been extremely risky had Chen not possessed inside information,” the complaint said.
In March 2016, Chen was questioned by the FBI, and in May of that year, by the SEC. He “downplayed” knowing the Vistaprint employee during the first interview, court documents said, and asserted his Fifth Amendment rights in declining to answer every question in the second interview.
Court documents make no mention of the Vistaprint insider being charged with a crime. She left the company in February 2015, the complaint said.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at email@example.com. Follow him on Twitter @INNJohnH.
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