April 10, 2018, 2:22 PM EDT
A proposed takeover in the technology sector that didn’t go anywhere nevertheless allowed a trader to make more than $5 million — and prosecutors say that’s because he was tipped by the co-founder of a Chinese-backed private equity firm.
Benjamin Chow is on trial in New York, accused of funneling confidential information to Michael Yin in the months leading up to a November 2016 announcement that this firm — Canyon Bridge Capital Partners LLC — had agreed to buy Lattice Semiconductor Corp. for $1.3 billion. Chow was required to keep the information secret, prosecutors said.
“Chow was telling his friend exactly what he told Lattice he was not going to tell a soul,” Assistant U.S. Attorney Max Clement Nicholas told jurors during opening arguments Tuesday. “He was giving him inside information.”
President Donald Trump killed the Lattice takeover, acting on a recommendation of the Committee on Foreign Investment in the U.S. It was just the fourth time in a quarter century that a U.S. president blocked a foreign takeover of an American firm on national-security concerns. The move reflects the tough stance the Trump administration has taken against Chinese takeovers amid trade disputes between the two countries.
Chow began passing information to his friend in 2016 while serving as managing director at China Reform Fund Management, a state-owned asset manager that had expressed interest in buying Lattice, prosecutors said. The tips continued after Chow co-founded Canyon Bridge and kept flowing until the month before the proposed Lattice deal was announced, according to the government.
“Chow gave Yin tomorrow’s news today,” Nicholas told the jury.
Yin wasn’t charged criminally. He was sued last year by the U.S. Securities and Exchange Commission and had brokerage accounts holding more than $29 million frozen for allegedly making illegal profits from insider trading ahead of Comcast Corp.’s April 2016 announcement of a planned takeover of DreamWorks Animation LLC.
Michael Sommer, Yin’s lawyer in the SEC case, didn’t immediately respond to a request for comemnt.
Chow is being tried for conspiracy to commit securities fraud and securities fraud, and could face as long as 25 years in prison. His trial is expected to go till the end of the month.
Yin never got any information that Chow was required to keep confidential, Chow’s lawyers said. Yin wasn’t a close friend or business associate but simply an acquaintance who had replaced Chow at an earlier job and was fishing for details about Lattice, which had been shopping itself publicly, they said.
Chow is “true American success story,” Katherine Goldstein, one of his attorneys, told jurors.
He came to the U.S. from China as a teen and worked his way to become a managing director at China Reform Fund Management, she said. The father of two isn’t accused of trading on any inside information or making any money from it, and prosecutors can’t show he got any kind of a benefit for giving tips to Yin, Goldstein said.
“Ben didn’t want to give away a gift worth millions of dollars in exchange for nothing at all,” Goldstein said. “Michael Yin made a well-timed bet on Lattice and he made millions of dollars, but Benjamin Chow didn’t make a dime.”
The case is U.S. v Benjamin Chow, 17-cr-00667, U.S. District Court, Southern District of New York.
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