Manhattan U.S. Attorney Announces Insider Trading Charges Against Analyst At Investment Bank

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that BILL TSAI, an analyst at an investment bank with offices in Manhattan (the “Investment Bank”), was arrested yesterday morning and charged with insider trading.  TSAI made profits in connection with options trading based on material, non-public information he misappropriated from the Investment Bank about an impending acquisition of a publicly traded company.  TSAI will be presented today in Manhattan federal court before United States Magistrate Judge Henry Pitman.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “In April of this year, Bill Tsai made a quick profit by trading options in a publicly traded company he knew was about to be acquired.  His profits were not the result of trading acumen, diligent research, or blind luck, but rather, as alleged, the product of theft of confidential information from his employer. For his alleged conduct, he now faces federal securities fraud charges.” 

As alleged in the Complaint unsealed today in Manhattan federal court:[1]

  In March 2019, the Investment Bank began working to provide financing to a private equity firm headquartered in New York (“Private Equity Firm-1”) on its possible acquisition of a publicly traded company Electronics for Imaging, Inc. (“EFI”).  Information relating to the EFI deal, including its existence, was non-public and confidential.  As an analyst at the Investment Bank, TSAI was responsible for, among other things, updating a running list of active transactional deals, including mergers and acquisitions, involving clients of the Investment Bank.  As such, TSAI had access to files containing material, non-public information, including information about the EFI deal.    

In violation of the Investment Bank’s policies and in breach of his duties to the Investment Bank and its clients, TSAI used material, non-public information about Private Equity Firm-1’s pending acquisition of EFI to purchase EFI call options.  Specifically, from on or about March 29, 2019 continuing until on or about April 12, 2019, TSAI bought 187 EFI call options, for a total price of approximately $28,410.  TSAI purchased the EFI call options through a brokerage account in his own name.  Contrary to Investment Bank policies, TSAI did not reveal his trades or the existence of the brokerage account to the Investment Bank.  

The public announcement of Private Equity Firm-1’s acquisition of EFI on the morning of April 15, 2019 caused EFI’s shares to increase in value.  Indeed, by the close of the market on April 15, 2019, EFI’s stock price had risen to $38 per share, an approximately 29.25% increase from the previous trading day’s close, resulting in an increase in the value of the call options TSAI had purchased.  On April 15, 2019, after the morning announcement of the EFI deal, TSAI placed an order to sell all 187 EFI call options he previously purchased.  TSAI’s trading activity in EFI options resulted in a profit of approximately $98,750. 

TSAI is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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Mr. Berman praised the investigative work of the FBI and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Robert L. Boone and Gina Castellano are in charge of the prosecution.

The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.