January 20, 2022

SEC charges Chicago lawyer with insider trading

On January 11, 2022, the US Securities and Exchange Commission charged David Sargent and Christopher Klundt with insider trading in connection with trades in the stock of Chegg, Inc., a California-based online educational services company, in advance of the company’s May 4, 2020 announcement regarding positive first-quarter earnings.

According to the SEC complaint, Sargent, a Chicago lawyer, purchased Chegg securities just days before the May 4 earnings release after he received material, non-public information from Klundt, a close friend and former colleague who worked for Chegg at the time.  Klundt allegedly tipped Sargent immediately following his attendance at a virtual, non-public Chegg meeting on May 1, 2020 during which the first-quarter earnings were disclosed.  Within an hour of receiving Klundt’s call, Sargent began purchasing $41,000 worth of Chegg stock and call options, many of which were “out of the money.”  Following the May 4, 2020 earnings announcement, Sargent allegedly sold the Chegg securities and realized more than $110,000 in illegal gains.

The SEC complaint, filed in the US District Court for the Northern District of Illinois, charges Sargent and Klundt with violating Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder, and requests permanent injunctions and civil penalties.  Simultaneous with the SEC lawsuit, the US Attorney’s Office of the North District of Illinois announced related criminal charges against Sargent and Klundt. 

SEC Press Release | SEC Complaint | DOJ press release | Indictment