The Securities and Exchange Commission today announced that two traders in China and Hong Kong have agreed to pay more than $920,000 to settle an insider trading case against them.
Cousins and business associates Zhichen Zhou and Yannan Liu, whose assets were frozen by an emergency court order when the SEC’s complaint was filed against them last month, must disgorge their entire ill-gotten profits of $306,929.59 plus pay penalties of $306,929.59 each. The court approved the settlement today.
The SEC’s complaint alleged that Zhou and Liu traded two health care company stocks (MedAssets Inc. 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.
“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,” said Julie K. Lutz, Director of the SEC’s Denver Regional Office.
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.
The SEC’s investigation was conducted by Frank Goldman and Jay Scoggins and supervised by Thomas Krysa of the Denver office. Assisting in the case were Hugh Beck and John Rymas of the Enforcement Division’s Market Abuse Unit. The SEC’s litigation was handled by Dugan Bliss and Mr. Goldman under the supervision of Gregory Kasper. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.