On February 6, the Securities and Exchange Commission filed insider trading charges against Hao He a/k/a Jimmy He in federal district court in Atlanta, Georgia. The SEC alleged that He obtained material, nonpublic information about Sina Corporation (Sina), a private issuer headquartered in Shanghai, China, from an unknown insider during a visit to China and in subsequent phone calls between October 10, 2012 and November 5, 2012. On November 13–14, 2012, He purchased $162,000 in short-term, put option contracts in Sina securities, expiring on November 17, 2012. In order for the purchase to be profitable, the stock price had to decline within the term of the options. On November 15, 2012, Sina announced that it beat analyst forecasts for third quarter earnings, but unexpectedly gave negative guidance for the fourth quarter. The following day, Sina’s stock declined 8.5 percent, and He sold all of his put option contracts for $331,530. The SEC alleged that He violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and sought an injunction barring him from engaging in similar transactions, disgorgement of illegally obtained profits with interest and civil monetary penalties. On February 7, the day after filing the complaint, the SEC announced that He consented, without admitting or denying the allegations, to a final judgment enjoining him from violating Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder, and requiring him to pay $169,819 in disgorgement of profit plus prejudgment interest of $6,155, and a $169,819 penalty. The settlement is subject to court approval.
Securities and Exchange Commission v. Hao He a/k/a Jimmy He, Case No. 1:14-cv-00344-MHS (N.D. Ga., filed Feb. 6, 2014).