Citi Analyst Tipped SAC, Citadel, GLG On iPhone Orders, Mass. Alleges

Oct 3 2013 | 3:22am ET

Citigroup has agreed to pay $30 million to settle allegations that an analyst gave three hedge funds, including SAC Capital Advisors, a sneak peak at a research report.

Kevin Chang, a former Citigroup Global Markets analyst in Taiwan, gave four clients—Citadel Investment Group, GLG Partners, SAC and T. Rowe Price—an unpublished research report at the end of last year predicting lower sales for Apple's iPhone, according to the settlement with Massachusetts regulators. Chang's report was based on information from Hon Hai Precision Industry, an iPhone manufacturer, and was not provided to other customers until three days later—by which time Apple shares had dropped more than 5%.

The settlement was first reported by the Boston Globe.

Three of the four clients who received the early research traded in Apple shares during those three days, Massachusetts Secretary of the Commonwealth William Galvin said. It is unclear whether any of them profited from the moves, but said he may bring charges against them, as well. "We haven't gotten their yet," he said.

According to the settlement, filed last night, Citi clients pressed Chang for insights he might have from Hon Hai. "Hey Kevin, Are you picking up any order cuts to iPhone?" one SAC employee wrote to Chang in an e-mail.

Chang was fired by Citi last month.

The Massachusetts case against Citi is unrelated to the federal insider-trading charges against SAC. The firm has denied any wrongdoing.


In Depth

GSAM’s Papagiannis on Liquid Alternatives

May 25 2016 | 5:07pm ET

The popularity of liquid alternatives strategies has blossomed in recent years,...

Lifestyle

From Modern Trader: Stephen Curry is a Black Swan

May 18 2016 | 7:43pm ET

What do the rise of the Internet, the sinking of the Titanic, 9/11, and Stephen...

Guest Contributor

LendingClub and the Question of Internal Hedge Funds

May 19 2016 | 8:42pm ET

Peer-to-peer lending platform LendingClub Corp. has been in the news since the firm...