May 6, 2020

SEC charges husband and wife with insider trading

On May 4, 2020, the US Securities and Exchange Commission charged Zhuobin Hong and Caixia Jiang, a husband and wife who currently live in China, with insider trading for their purchase of Sagent Pharmaceuticals, Inc. securities.  While residing in California, the defendants allegedly obtained material nonpublic information from a neighbor and close friend who was the chairman and majority shareholder of a China-based pharmaceutical company that was competing to acquire Sagent.  According to the complaint, the couple opened brokerage accounts in the names of two relatives in China after learning of Sagent’s potential acquisition, and in 2015 and 2016 purchased over 1.17 million shares of Sagent securities – purchases so voluminous that they occasionally comprised over 20 percent of the daily trading volume of Sagent securities.  When Sagent’s acquisition was publically announced in July of 2016, stock prices increased by 40 percent, and the couple immediately sold their shares resulting in illegal profits of over $8.5 million.

The SEC filed suit in US District Court for the Central District of California charging the defendants with violating Section 10(b) and 14(e) as well as Rule 10b-5 and 14e-3 of the Securities and Exchange Act of 1934, and asked that the couple be prohibited from participating in securities trading, pay disgorgement of all unlawful gains, pay civil penalties pursuant to the Exchange Act Section 21A, and any additional relief that the court deems appropriate.  The complaint also names the couple’s China-based relatives as relief defendants alleging unjust enrichment from the brokerage accounts opened in their names, and requesting that they disgorge all unlawful profits obtained during the scheme.

SEC Press Release | SEC Complaint