SEC Settles Insider Trading Charges Against Pharma Company Accountant, Three Others

Litigation Release No. 24441 / April 4, 2019

Accounting and Auditing Enforcement Release No. 4038 / April 4, 2019

Securities and Exchange Commission v. Evan R. Kita, et al., Civil Action No. 17-06603 (D. NJ., filed August 31, 2017)

On March 19, 2019, the Securities and Exchange Commission obtained final judgments against a pharmaceutical company accountant and three tippees in an insider trading scheme.

The SEC charged Evan R. Kita, Daniel Perez, Richard Yu, and Chiang Yu on August 31, 2017, alleging that Kita, a CPA and former accountant at Celator Pharmaceuticals Inc., provided confidential information about the company to Perez and Richard Yu, who purchased Celator stock based on Kita's tips and agreed to share their trading profits with Kita. The SEC further alleged that Richard Yu passed the tips to his father, Chiang Yu, who also traded. According to the complaint, to avoid detection, Kita communicated with Perez and Richard Yu through an encrypted smartphone application.

In parallel criminal actions brought by the U.S. Attorney's Office for the District of New Jersey, Kita, Perez, Richard Yu, and Chiang Yu each pled guilty to criminal charges and were ordered or agreed to forfeit their ill-gotten gains. Kita was sentenced to six months of incarceration. Perez, Richard Yu, and Chiang Yu were sentenced to probation.

The final judgments permanently enjoin Kita, Perez, Richard Yu, and Chiang Yu from violating the antifraud provisions of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, and order them to pay a combined total of $442,006 in disgorgement and prejudgment interest. The judgments provide that the disgorgement and prejudgment interest are deemed satisfied by forfeiture ordered or paid in the parallel criminal cases. In a separate administrative proceeding, the SEC issued an order permanently suspending Kita from appearing and practicing before the SEC as an accountant. The order prohibits Kita from participating in the financial reporting or audits of public companies.

The SEC's investigation was conducted by David W. Snyder and John S. Rymas and supervised by Assunta Vivolo, Kelly L. Gibson, and Joseph G. Sansone, Chief of the Market Abuse Unit. The litigation was led by Jennifer Chun Barry. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of New Jersey, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.