Insider Trading and Options Trading Scheme of VistaPrint Stock Results in Federal Indictment

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Securities Fraud

Charlie Jinan Chen, 48, was charged in federal court in Boston, Massachusetts, in connection with insider trading. Specifically, trading on non-public information and profiting more than $800,000, over the course of three months. The trading scheme involved VistaPrint, a Cimpres company, focused on providing high-quality, custom-printed products to small and medium sized businesses.

Illegal insider trading “refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security,” according to the SEC.

Indictment Details

The indictment alleges Chen leveraged his close personal relationship with a former VistaPrint employee that worked in the Financial Planning and Analysis department. What’s more, Charlie Chen obtained earnings data and acted on the information before it was public domain. With this purpose in mind, Chen utilized the non-public information and engaged in options trading (“put and call” options), to correctly anticipate the direction of VistaPrint’s underlying stock price. The most compelling evidence was that Chen had his largest position in VistaPrint stock. Not only that, Chen claimed the VistaPrint employee was merely an acquaintance. In reality, the individual was a very close family friend and they enjoyed family vacations to exotic tropical destinations.

“In the final two quarters of 2014, Chen profited more than $800,000 by correctly predicting the direction of the change in the company’s share price following the company’s earnings announcements,” the FBI said in a news release.

Chen enjoyed the windfall money briefly. Allegedly, he used a portion of the insider trading scheme proceeds to purchase a condominium in Stoneham, MA. Mr. Chen is facing two charges; securities fraud and making a materially false statement to Federal Agents.

While the U.S. Department of Justice and regional U.S. Attorneys’ offices carry out criminal prosecutions of individuals who violate the federal securities laws, potential insider trading is often initially uncovered by the Financial Industry Regulatory Authority (FINRA). The FINRA Whistleblower hotline that accepts tips and complaints via telephone (1-866-96-FINRA or 1-866-963-4672) or email ([email protected]).