The Securities and Exchange Commission announced Friday that it obtained an emergency court order freezing brokerage accounts holding more than $29 million in allegedly illegal profits from insider trading that took place prior to the April 2016 acquisition of DreamWorks Animation SKG, Inc. by Comcast Corp.

In its complaint, the SEC alleged that in the weeks leading up to news of the acquisition, Shaohua (Michael) Yin attained more than $56 million of DreamWorks stock in U.S. brokerage accounts of five Chinese nationals, including his parents. The stock was allegedly obtained over a three-week period after a confidential bid had been placed to buy the studio. After the acquisition was announced, DreamWorks stock price rose over 47%.  

The SEC’s complaint further alleged that the five accounts gained $29 million in profits from the DreamWorks trades, and that the accounts profited from other suspicious trading in another U.S.-based company and three China-based companies ahead of market-moving news.

Yin, a partner at Summitview Capital Management Ltd., a Hong Kong-based private equity firm, allegedly did not trade in DreamWorks stock through his own account but instead through five accounts from addresses in Beijing and Palo Alto and on a computer that also accessed his email accounts.

Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office, stated in the SEC press release that, “Despite the defendant’s alleged attempts to hide his control over these accounts, the SEC’s data analytic investigative tools enabled us to determine who was behind the suspicious trades. Our action today shows that the SEC will not hesitate to freeze the assets of foreign traders when they use our markets to conduct illegal activity.”

The SEC was successful in securing a temporary restraining order freezing the assets in the five brokerage accounts in the U.S. District Court for the Southern District of New York. A hearing on an order to show cause why an injunction and other relief should not be issued has been scheduled for February 17.

The SEC’s complaint charges Michael Yin with securities fraud and names the holders of the five brokerage accounts – Lizhao Su, Zhiqing Yin, Jun Qin, Yan Zhou and Bei Xie – as relief defendants.  The SEC is seeking a permanent injunction, return of all allegedly ill-gotten profits, civil money penalties, and other relief.

The SEC’s press release can be viewed at the following link:

https://www.sec.gov/news/pressrelease/2017-44.html

 

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC examinations and investigations. He can be reached in San Diego at 858.792.3666, and in Chicago at 312.583.7488.