April 09, 2018
Alleged Insider Trading of Vistaprint Stock Leads to Indictment
A Massachusetts man obtained private financial data about Vistaprint from a former employee and her husband and then used the illegal insider information to make trades in the firm’s stock that netted him more than $800,000, according a federal indictment. Vistaprint, a web-based seller of customizable business materials and promotional products, is owned by Top 40 distributor Cimpress (asi/162149).
Late last week, Charlie Jinan Chen, 48, was indicted on three counts of securities fraud and one count of making a material false statement. Authorities did not identify the former Vistaprint employee or her husband in the indictment, and have not indicated if the couple will face charges.
According to the criminal charges, the former Vistaprint employee, who resigned in 2015, worked in the company’s financial planning and analysis department. Her duties included preparing and reviewing Vistaprint’s quarterly earnings data before it was public. Nonetheless, between July 2012 and July 2014, Chen obtained Vistaprint’s financials from the couple in advance of the information’s official release. Leveraging his unfair advantage, Chen engaged in “put and call” option trading, correctly predicting how Vistaprint’s stock price would change following earnings announcements, according to the indictment.
“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 allegedly used a portion of the proceeds of the insider trading scheme to purchase a condominium in Stoneham, MA.
Authorities assert that Chen also lied to federal agents. He allegedly told them he could not remember his option trading on Vistaprint, even though it was the largest position he had taken in any stock and had amassed him $800K in profits in just three months. Chen also claimed that the former Vistaprint employee’s spouse was an acquaintance, rather than a close friend, the FBI said. However, Chen and his family socialized extensively with the other couple, even vacationing together in places like Hawaii and Europe, the indictment stated.
If convicted of a securities fraud charge, Chen faces a potential maximum of 20 years in prison, three years of supervised release and a fine of up to $250,000. The charge of making a materially false statement provides for a sentence of no greater than five years in prison, one year of supervised release and fine of up to $250,000.