Rong Chen, et al.

Litigation Release No. 24417 / March 4, 2019

Securities and Exchange Commission v. Rong Chen, et al., No. 2:18-cv-07840-CAS (JPRx) (C.D. Cal. filed September 10, 2018)

On March 1, 2019, the U.S. District Court for the Central District of California entered a consent judgment against corporate deal advisor Rong Chen, who was charged by the Securities and Exchange Commission with insider trading.

In September 2018, the SEC charged Chen, a United States citizen residing in China, with illegally trading the securities of two companies based on confidential information regarding impending acquisitions learned in the course of advising the acquiring companies. According to the complaint, in 2013, when Chen was Vice President of Investments for Tsinghua Unigroup Limited, he learned of the impending acquisition of RDA Microelectronics Inc. The SEC’s complaint alleges that, shortly before the deal was made public, Chen opened a brokerage account in his wife’s name and used it to make a series of purchases of RDA securities, generating more than $75,000 in illicit profits. The complaint further alleges that, in 2015, when Chen was a Managing Director at a Hong Kong-based investment banking firm that was advising Inc. on its acquisition of rival, he again used his wife’s brokerage account to buy out-of-the-money call options, which he sold after news of the acquisition became public, for illicit profits of more than $90,000.

Without admitting or denying the allegations in the SEC’s complaint, Chen consented to the entry of a final judgment permanently enjoining him from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Chen also agreed to pay disgorgement of $167,092, prejudgment interest of $26,356, and a $167,092 civil penalty. Following Chen’s agreement to disgorge his ill-gotten gains, the SEC will voluntarily dismiss its claim against Chen’s Wife, Yuehong Wang, whom the SEC sued as a relief defendant.

The SEC’s investigation was conducted by Marcus Fruchter and Amy Flaherty Hartman of the SEC’s Cyber Unit in the Chicago Regional Office and David Makol and John Rymas of the Market Abuse Unit’s Analysis and Detection Center. The case was supervised by Joseph Sansone, Chief of the Market Abuse Unit, and Kathryn Pyszka, an Associate Regional Director in the Chicago Regional Office. The litigation was led by Benjamin Hanauer and Mr. Fruchter. The SEC appreciates the assistance of FINRA.

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