Zhichen Zhou and Yannan Liu Charged with Insider Trading

On November 10, 2015 the Securities and Exchange Commission (SEC) announced insider trading charges and an emergency asset freeze against cousins Zhichen Zhou and Yannan Liu. The SEC alleged that the Defendants traded in advance of the acquisition of two healthcare companies, MedAssets, Inc. and Chindex International Inc. The SEC also alleges that Zhou used funds provided by his cousin to trade illegally, resulting in profits of approximately $300,000. The SEC claimed that Liu, who was formerly employed by a private equity firm that was a bidder in both the MedAssets and Chindex International acquisitions, provided Zhou with the non-public information about the acquisitions. On November 2, 2015 when the acquisition of MedAssets was announced, the stock rose more than 30%. Similarly, Chindex International’s stock rose more than 13% on February 17, 2014, the date of the announcement.

According to the SEC’s insider trading complaint, Zhou, a resident of Beijing, China, used a newly opened brokerage account to purchase almost 40,000 shares of MedAssets at a cost of nearly $900,000. Liu, a resident of Hong Kong, provided the bulk of the funds used to purchase the stock. The nearly $900,000 in purchases of MedAssets represented more than four times Zhou’s stated net worth.

The SEC also alleges that Zhou illegally profited from trades in Chindex International based on information provided by Liu. In that instance, Zhou purchased more than 3,000 shares leading up to the acquisition announcement and reaped profits of approximately $7,500.

The United States District Court for the Southern District of New York granted the SEC’s request for an asset freeze against funds held in Zhou’s United States brokerage accounts, and issued an order to show cause why an injunction and other miscellaneous relief should not issue. A hearing has been scheduled for November 24, 2015.

The SEC’s insider trading complaint charged the defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking permanent injunctions, disgorgement, civil money penalties, and other relief. The investigation is ongoing.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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