SEC Settles Another Expert Network Insider Trading Case

by Dorsey & Whitney LLP

The Commission filed another settled insider trading case tied to its long-running expert network investigation. This time the action traces to the source of tips regarding Nvidia Corporation, Chris Choi. SEC v. Choi (S.D.N.Y. Filed April 23, 2014). It also names as relief defendants others from the expert network investigation including Diamondback Capital Management Capital, LLC, Level Global Investors, L.P., and Sigma Capital Management, LLC along with employees at those firms.

Chris Choi was employed at Nvidia as an accounting manager. He was friends with Hyung Lim who in turn was friends with Danny Kuo, a hedge fund manager at Whittier Trust Company. On three instances in 2010 and 2011 Mr. Choi furnished his friend inside information regarding a pending earnings announcement for his company. In each instance that information was passed to Mr. Kuo who caused the hedge fund employing him to trade. In one instance Mr. Kuo distributed the information not just to those at his fund but also on one occasion to others involved in the expert network investigation that traded.

The first tip involved the earnings announced by Nvidia, issued after the close of the market on May 7, 2009. At that time the results for the first quarter of 2010 were released. Beginning in early April 2009 Mr. Choi tipped his friend Mr. Lim about the upcoming financial results. The tip indicated that results might be substantially worse than expected.

Mr. Choi updated the tipped information later in the month. Indeed, as the time for the quarterly earnings announcement drew near, Mr. Choi continued to update the information. As a result Whittier sold shares of Nvidia and established a short position.

Mr. Kuo forwarded the information to others including Jesse Tortora at Diamondback, Spyridon Adondakis at Level Global and Jo Horvath at Sigma Capital. Each caused their firm to trade based on the information.

Following Nvidia’s announcement that its financial results were worse than had been expected it share price fell. Each of the four funds had loses avoided and profits made of: Whittier, $144,000; Diamondback, $73,000; Sigma Capital, $500,000; and Level Global, $15.6 million.

The second tip concerned the financial results for third quarter 2010, announced November 5, 2009 after the close of the market. In this instances Mr. Choi tipped his friend Mr. Lin regarding the then pending financial results the day before the announcement. This time the information was positive – the results would be good. The day of the announcement Whittier, to whom the information had been passed, purchased a block of Nvidia’s stock.

Nvidia announced results which exceeded expectations. The share price closed up substantially the next day. Whittier had trading profits of over $44,000.

The third tip involved the financial results for the third quarter of 2011, announced after the close of the market on November 11, 2010. Beginning nine days before the announcement Mr. Choi told Mr. Lim that the firm’s results would be better than expected for the quarter. Later, prior to the announcement, he reconfirmed the information. That information was transmitted to Messrs. Adondakis and Tortora.

Whittier purchased Nvidia shares while in possession of the inside information. Following the earnings announcement the shares of the company increased significantly. Whittier had profits of $105,000.

Mr. Lim was paid $15,000 by Mr. Kuo who also provided him with inside information on another stock. Trading on that tip yielded him $11,000.

The complaint, which charges that Mr. Choi is responsible for the trading by Whittier and each of the other funds that traded, alleges violations of Exchange Act Section 10(b) and Securities Act Section 17(a). Mr. Choi resolved the charges, consenting to the entry of a permanent injunction prohibiting future violations of each of the Sections cited in the complaint. He also agreed to pay a civil penalty of $30,000 and to the entry of an order barring him from serving as an officer or director of a public company for five years.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dorsey & Whitney LLP | Attorney Advertising

Written by:

Dorsey & Whitney LLP

Dorsey & Whitney LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.