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Screenshot of a breaking news alert e-mail from Q2 2017
The US Securities and Exchange Commission (SEC) has brought insider trading charges against a Goldman Sachs employee, John Han (also known as Yue Han). Han stands accused of stealing nonpublic information in the firm’s email system so he could trade illegally in advance of client mergers, making more than $450,000 in illegal profits.
The SEC has obtained an emergency court order to freeze Han’s assets and the accounts he used to place the trades.
The SEC noted that Han is a ‘former’ employee of Goldman, however it did not say when exactly he left the firm. He only started there in late 2014, and his LinkedIn profile still has him at Goldman Sachs.
The SEC alleges that Han, who worked as an associate in Goldman’s compliance department, traded on confidential information contained in emails sent and received by Goldman Sachs’ investment bankers responsible for advising clients on impending merger and acquisition transactions. Han gained access to investment banker emails as part of his work developing surveillance software designed to monitor other employees for potential misconduct such as insider trading. (Can you say ‘ironic’?)
The SEC’s case stems from its Market Abuse Unit’s Analysis and Detection Center, 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.
According to the SEC’s 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. Wei Han is named as a relief defendant in the SEC’s complaint for the purposes of recovering ill-gotten gains that Yue Han generated by trading in the account held in Wei Han’s name.
More on the SEC charges brought against John Han can be viewed here.