Danny Kuo and Todd Newman, two of seven men accused of taking part in a “criminal club” of hedge fund traders and analysts who swapped illegal secrets involving Dell Inc. (DELL), were allowed to remain free on bond.
Both Kuo, a former fund manager at Whittier Trust Co., and Newman, a former portfolio manager at Diamondback Capital Management LLC, were arrested on Jan. 18 by agents of the Federal Bureau of Investigation. Kuo, who was arrested at his home in San Marino, California, and Newman were ordered to appear in Manhattan federal court today to face the charges.
U.S. Magistrate Judge Michael Dolinger agreed to release Newman on $3 million bond secured by $750,000 in cash. He also ordered Newman to surrender his travel documents and limit his travel to parts of New York, as well as to Massachusetts, Rhode Island and Connecticut.
“My client has been aware of the investigation for more than a year, and in addition, there were reports in December that he would be charged and nothing happened,” his lawyer, Alfred Pavlis, told Dolinger. “His actions show that he intends to appear in court and respond to the charges.”
Dolinger directed that Kuo be released on $300,000 bond and surrender his Taiwanese and U.S. passports.
Citing Kuo’s ties to Taiwan, Assistant U.S. Attorney David Leibowitz said the U.S. wanted more stringent restrictions placed on his movements, and those of his wife and child. The prosecutor also said Kuo had lost his job and stopped going to school, further loosening his links to the U.S.
Dolinger said Kuo’s wife must notify court authorities in writing two weeks in advance if she or the couple’s child will be making any “significant” travel outside the U.S.
Newman and Kuo are each charged with conspiracy to commit securities fraud and securities fraud. They face as long as 25 years in prison if found guilty, prosecutors said.
Newman, Kuo and their co-defendants reaped almost $62 million from insider trades in the personal-computer maker, U.S. Attorney Preet Bharara said last week. The tipping scheme included one trade that earned a $53 million illegal windfall for Level Global Investors LP co-founder Anthony Chiasson and his fund, prosecutors said. Chiasson also has been arrested and charged.
A five-year insider-trading probe by Bharara’s office, dubbed “Perfect Hedge” by the FBI, has resulted in charges against 63 people, Janice Fedarcyk, head of the bureau’s New York office, said last week. More than 50 have pleaded guilty or been convicted after trial since 2009, including Galleon Group LLC co-founder Raj Rajaratnam.
The case is U.S. v. Newman, 12-00124, U.S. District Court, Southern District of New York (Manhattan).
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