The U.S. filed new securities-fraud charges against Level Global Investors LP co-founder Anthony Chiasson, ex-Diamondback Capital Management LLC portfolio manager Todd Newman and New York analyst Jon Horvath.
All three were charged in January by prosecutors in the office of Manhattan U.S. Attorney Preet Bharara with being part of a “criminal club” of friends and co-workers who reaped almost $62 million from insider trading in Dell Inc. (DELL) shares.
The men were initially charged with conspiracy and securities fraud. The revised indictment filed yesterday adds charges of securities fraud stemming from the actions of Danny Kuo, a former analyst at Whittier Trust Co., a South Pasadena, California-based wealth-management company. Kuo, who was arrested with the defendants in January, pleaded guilty in April and agreed to cooperate with the government.
The revised indictment describes how the criminal club worked and how fund managers passed insider tips to each other. Prosecutors allege that Kuo knew an unnamed insider at Nvidia Corp. (NVDA) and obtained information about the company’s financial results, including revenues and gross margins, before quarterly earnings announcements. Nvidia, based in Santa Clara, California, makes graphics processors.
The U.S. said Kuo obtained information in advance of Nvidia’s May 7, 2009, earnings announcement and then provided it to Horvath, a former analyst at Sigma Capital Management LLC; Jesse Tortora, formerly of Diamondback; and Spyridon “Sam” Adondakis, a Level Global analyst.
Tortora then passed the nonpublic information about Nvidia to Newman, who traded on the information, the government said. Adondakis provided the information to Chiasson, prosecutors said in the latest indictment.
Both Tortora and Adondakis have pleaded guilty and are cooperating with the U.S.
When Kuo pleaded guilty in April, the government said he obtained inside information about Nvidia and passed the information to the group and an unnamed portfolio manager.
John Nathanson, a lawyer for Newman, declined to comment on the new charge against his client.
Greg Morvillo, a lawyer for Chiasson, and Steve Peikin, a lawyer for Horvath, didn’t return voice-mail messages yesterday seeking comment on the charges.
Sigma is a division of SAC Capital Advisors LP. Jonathan Gasthalter, a spokesman for Stamford, Connecticut-based SAC, declined to comment on the superseding indictment.
The three men pleaded not guilty and face trial before U.S. District Judge Richard Sullivan on Oct. 29. Securities fraud carries a term of as long as 20 years in prison.
Prosecutors said in court after Chiasson’s arrest on Jan. 18, that he used inside information to win for his Level Global fund what the U.S. said was a single “enormous bet” of $53 million on Dell trades.
The case is U.S. v. Newman, 12-00124, U.S. District Court, Southern District of New York (Manhattan).
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