On August 30, 2024, the Securities and Exchange Commission announced that it reached a $39.5 million settlement with Shaohua (Michael) Yin, a former partner at a Hong Kong-based equity firm, to resolve insider trading charges for allegedly purchasing securities of Lattice Semiconductor Corporation and DreamWorks Animation SKG, Inc. before their impending acquisitions were announced publicly.
According to the SEC’s amended complaint, Yin was in communication with relief defendant Chaofeng Ji, an asset manager with ties to PAG Asia Capital, a company that unsuccessfully bid to acquire DreamWorks in 2016. While in communication with Ji, Yin allegedly purchased 2.15 million shares of DreamWorks securities that were allegedly purchased over a period of three weeks prior to the company’s acquisition by Comcast Corporation. Yin did not use accounts in his own name to purchase the securities but used five individual trading accounts nominally held by relief defendants living in Beijing, including Yin’s elderly parents and his cousin. When the acquisition was announced in April 2016, DreamWorks stock increased by more than 47 percent, allegedly enabling the five accounts to generate illicit profits of more than $29 million. Later that year, in July 2016, Yin allegedly used the same five accounts to purchase more than $44 million in Lattice stock based on material nonpublic information (“MNPI”) received from Benjamin Bin Chow. Chow allegedly served as the chief negotiator for Canyon Bridge Capital Partners, Inc., the company that ultimately acquired Lattice. When the Lattice acquisition was announced publicly in November 2016, the five accounts allegedly realized total profits of more than $7.1 million. According to the SEC’s amended complaint, Yin also used the five accounts to profitably trade in three China-based public companies in advance of “market-moving announcements,” which allegedly generated another $14 million in highly suspect trading profits.
In February 2017, just before Yin boarded a flight to China, agents with the Federal Bureau of Investigation executed a search warrant and questioned Yin regarding the trades. During the interview, Yin allegedly admitted that he controlled the five trading accounts and asked the agents if the accounts would be frozen. While the FBI was successfully able to freeze the funds in the accounts, Yin allegedly made multiple attempts to withdraw more than $35 million from the accounts before they were frozen.
The SEC charged Yin and Chow with violating Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) thereunder, while the relief defendants were charged with unjust enrichment. As part of the settlement with the SEC, Yin agreed to pay a $39.5 million civil penalty from the frozen funds in the five brokerage accounts. Yin was also permanently enjoined from committing further securities violations. On August 16, 2024, the cases against the relief defendants were dismissed.
In 2022, a final judgment was entered against Chow in which he agreed to be permanently enjoined from further securities violations. Chow was also “barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statical rating organization.” According to the SEC’s order, in 2018, Chow was previously convicted of six counts of securities fraud and one count of conspiracy to commit securities fraud, for which he served 3 months in prison, 2 years of supervised release and paid more than $1.3 million in restitution.
SEC Litigation Release | SEC’s Second Amended Complaint | Yin – Consent and Final Judgment | Chow – Final Judgment | SEC Order – Chow