December 28, 2015 / 10:31 PM / 3 years ago

Two Chinese citizens in insider trading settlement with U.S. regulator

NEW YORK (Reuters) - Two Chinese citizens including a former employee at private equity firm TPG Capital LP [TPG.UL] have agreed to pay $920,000 to resolve U.S. regulators’ allegations they engaged in insider trading.

The U.S. Securities and Exchange Commission announced the settlement on Monday with cousins and business associates Zhichen Zhou and Yannan Liu, whose assets were frozen after the regulator filed a lawsuit last month in Manhattan federal court.

The SEC had alleged that Zhou, a web administrator for Chinese Web-based peer-to-peer lending platform Yooli.com, engaged in “highly suspicious” trading in the stocks of MedAssets Inc and Chindex International Inc.

Both companies later announced private equity takeovers in deals where one of the bidders had been TPG, where Yooli.com Chief Executive Yannan Liu, Zhou’s cousin, previously worked, the SEC said.

MedAssets agreed earlier in November to be acquired by Pamlona Capital Management for $2.75 billion. Chindex announced in February 2014 a $369 million deal to be taken private by a consortium including TPG.

The SEC said trading in which Zhou engaged before those deals were publicly announced enabled him to make $306,930 in net profits.

The agency said “strong circumstantial evidence” existed establishing that those trades resulted from Zhou engaging in insider trading with Liu, whose association with TPG put him in a position to obtain confidential information.

Under the settlement, Zhou and Liu must each pay penalties of $306,929 and jointly forfeit $306,929 in illegal profits, according to court papers. The settlement was approved by U.S District Judge Thomas Griesa.

Marc Agnifilo, Liu’s lawyer, said he was pleased his client would not be barred from the securities industry under the deal. A lawyer for Zhou did not immediately respond to a request for comment.

The case is Securities and Exchange Commission v. Zhou, U.S. District Court, Southern District of New York, No. 15-8796.

Reporting by Nate Raymond; Editing by Peter Cooney

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