Investing

SEC Charges Former Goldman Sachs Employee With Insider Trading

Chris Lange

Published: November 30, 2015 12:35 pm

Last Updated: January 13, 2020 4:40 pm

The U.S. Securities and Exchange Commission (SEC) announced insider trading charges against a former Goldman Sachs employee who stands accused of stealing nonpublic information in the firm’s e-mail system. The agency claims that he then used this information to trade illegally in advance of client mergers and make over $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, or John Han as some know him, an associate in Goldman’s compliance department, 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 case stems from the Market Abuse Unit’s Analysis and Detection Center of the SEC, 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.

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Joseph G. Sansone, co-chief of the SEC Enforcement Division’s Market Abuse Unit, said:

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. 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 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.

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