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Tenafly hedge fund operator agrees to pay U.S. $16 million

Photo Credit: Cliffview Pilot File Photo

Sung Kook “Bill” Hwang, a Tenafly businessman who ran a hedge fund focused on Asian stocks, agreed on Wednesday to settle federal charges over insider trading by paying $16 million to the government.

Hwang pleaded guilty in federal court in Newark this afternoon to a single count of wire fraud on behalf of his company, Tiger Asia Management, financed by fund guru Julian Robertson.

In turn, a federal judge sentenced Tiger Asia to one year of probation and ordered Tiger Asia to forfeit more than $16 million in criminal proceeds.

“On more than one occasion, Tiger Asia was entrusted with confidential, non-public information about companies only  to turn around and violate that trust by illegally trading millions of shares of the company’s stock for huge profits,” U.S. Attorney Paul J. Fishman said.

“This criminal activity by a hedge fund operator, one of the biggest in the world, is unacceptable,” Fishman said. “The investing public must be reassured that they are investing in markets that are operated fairly.”

Hwang founded Tiger Asia Management in 2001 as one of the “Tiger Cubs,” a group spun off from Tiger Management Corp., which in the late 1990s was one of the largest hedge funds sponsors in the world.

Tiger Asia managed two separate hedge funds, Tiger Asia Overseas Fund, Ltd. and Tiger Asia Fund, L.P., which specialized in Asian-trading equities.

Through these funds, Tiger Asia at times managed more than $5 billion in assets, the government said.

Three different times between December 2008 and January 2009, investment bankers contacted Tiger Asia and asked whether Tiger Asia was interested in purchasing shares of stock in one of two Chinese companies whose stock was traded on the Hong Kong Stock Exchange, federal authorities said.

Before providing further information to Tiger Asia concerning the companies or the terms of the proposed sales, however, the investment bankers first required that Tiger Asia agree to be brought “over the wall,” or “wall-crossed” — standard industry terms that meant Tiger Asia was required to keep the information disclosed to it confidential and couldn’t buy or sell stock based on the information.

Each time, however, a Tiger Asia executive violated the agreement, the government contended.

The company then used the confidential information to trade millions of shares of stock in the companies at issue, profiting to the tune of $16 million, Fishman said.

Fishman praised special agents of the FBI, the IRS — Criminal Investigation unit, and the U.S. Securities and
Exchange Commission’s Division of Enforcement in New York for the investigation. Prosecuting the case was Assistant U.S. Attorney Christopher J. Kelly of Fishman’s Economic Crimes Unit in Newark.

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