On August 17, 2022, the Securities and Exchange Commission announced that it charged Florida resident Nicholas Daniel with insider trading for improperly trading in the securities of Cypress Semiconductor Corporation, a California-based semiconductor design and manufacturing company, ahead of an announcement regarding the company’s impending acquisition.
According to the SEC’s complaint, Daniel learned of Cypress’s possible acquisition on the morning of May 29, 2019 from a media article. About an hour after reading the article, Daniel had a telephone call with his mother who was living with a close family member who worked for Cypress as a senior-level employee. During the call, his mother shared in confidence that the family member happened to be at home working on an urgent matter related to the acquisition and that the acquisition was likely to occur soon. Immediately following the phone call, Daniel allegedly misappropriated the material nonpublic information (MNPI) and began gathering funds in order purchase Cypress securities, including $50,000 that he borrowed from his mother under false pretenses. The SEC alleges that, on May 30 and 31, 2019, Daniel used all of the money in his brokerage account to purchase Cypress call options contracts. On June 3, 2019, Cypress announced that it was being acquired by a German corporation causing Cypress’s stock increased by almost 28 percent. As a result, Daniel allegedly realized almost $350,000 in illicit profits – a nearly 700 percent return.
In its complaint, the SEC charged Daniel with violating the antifraud provisions in Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the allegations in the complaint, Daniel agreed to the entry of a judgment against him, consented to a permanent injunction and agreed to pay more than $738,000, including disgorgement of nearly $350,000, more than $38,000 in prejudgment interest and a civil penalty of almost $350,000. The proposed judgment is subject to court approval.