SEC Charges Two Friends and Former Business Associates with Insider Trading

The Securities and Exchange Commission filed charges today against two individuals for insider trading involving tipping and trading in the stock of Chegg, Inc. in advance of a positive quarterly earnings announcement on May 4, 2020.

The SEC's complaint alleges that days before the May 4 earnings release, David Sargent, a Chicago-area lawyer, purchased Chegg stock and options on the basis of material, non-public information obtained from his close friend and former business associate, Christopher Klundt, then an employee of Chegg. According to the complaint, Klundt attended a non-public, internal Chegg meeting on May 1 during which Chegg senior management discussed what would be disclosed in Chegg's upcoming May 4 earnings release. The complaint alleges that almost immediately after the meeting, Klundt called Sargent, and, within an hour of that call, Sargent began purchasing $40,000 worth of Chegg stock and call options. As alleged, Sargent sold these securities after the earnings release, generating more than $110,000 in profits.

The SEC's complaint charges Klundt and Sargent with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking permanent injunctions and civil penalties against both defendants.

In a parallel action, the U.S. Attorney's Office for the Northern District of Illinois announced criminal charges against Klundt and Sargent.

The SEC's investigation was conducted by Austin Stephenson, with the assistance of Robert Nesbitt in the Office of Investigative and Market Analytics. The case was supervised by Brian D. Fagel. The litigation will be led by Kevin A. Wisniewski and Daniel J. Hayes. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.