Insider Trading

Former CFO of Private Equity Fund Pleads Guilty to Insider Trading Charges


SAN FRANCISCO—King Chuen Tang pleaded guilty to insider trading charges in federal court in San Francisco today, United States Attorney Joseph P. Russoniello announced.

In pleading guilty, Tang admitted that in the Spring of 2008, while working as the CFO of a private equity fund, he misappropriated inside information regarding Tempur-Pedic International, Inc. The information involved a pre-announcement of earnings news and plans for Tang’s equity fund to purchase a large stake of Tempur-Pedic. Tang shared that inside information with friends, and both he and his friends invested as a result of learning that information. In 2007, Tang had received inside information from his brother-in-law who was then the CFO of a venture capital fund. He also shared this information with his friends, and both he and his friends invested based on the inside information. In all, Tang and his friends made approximately $5.5 million from the trades executed after learning the inside information.

Tang, 40, of Fremont, Calif., was charged in an Information with one count of conspiracy to commit insider trading and one count of insider trading in violation of Title 18, United States Code, Section 371, and Title 15, United States Code, Sections 78j(b) and 78ff and C.F.R. §§ 24.10b5, 240.10b5-1 and 240.10b5-2. Pursuant to the plea agreement, Tang pled guilty to all counts.

Tang is out on bail. He is next scheduled to appear before U.S. District Court Judge Jeffrey S. White in San Francisco on Sept. 16, 2010, for status. The maximum statutory penalty for the conspiracy count is five years of imprisonment and a $250,000 fine. The maximum statutory penalty for the insider trading count is twenty years of imprisonment and a $5 million fine. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Jonathan Schmidt is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Ponly Tu. The prosecution is the result of a one-year investigation by the Federal Bureau of Investigation.

Securities fraud is a major focus of President Barack Obama’s Financial Fraud Enforcement Task Force. 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.