Investing

SEC Settles Charges Against Chinese Inside Traders

Chris Lange

Published: December 29, 2015 2:32 pm

Last Updated: January 13, 2020 3:36 pm

The U.S. Securities and Exchange Commission (SEC) announced that two traders in China and Hong Kong have agreed to pay over $920,000 to settle an insider trading case against them.

Zhichen Zhou and Yannan Liu are cousins as well as business associates. Their assets were frozen by an emergency court order when the SEC’s complaint was filed against them just last month. These cousins must disgorge their entire ill-gotten profits of $306,929.59 and on top of that pay penalties of $306,929.59 each. The court approved the settlement on December 28, 2015.

The SEC’s complaint alleged that Zhou and Liu traded two health care company stocks (MedAssets and Chindex International) based on nonpublic information about their impending acquisitions by private equity firms.

Liu was a private equity associate at TPG Capital, which had ties to both of the deals, and maintains a personal relationship with at least one current TPG Capital employee.

As a result, Zhou and Liu, who reside in Beijing and Hong Kong respectively, settled the charges without admitting or denying the allegations. They consented to the final judgment permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.

Julie K. Lutz, Director of the SEC’s Denver Regional Office, commented:

Insider trading is more damaging than it is profitable, as experienced by these traders. First they had their assets frozen by a court order, and now they must pay three times the amount of their insider trading profit to settle the case.