With the help of the U.S. Secret Service, the Securities and Exchange Commission has brought forth charges against four hedge fund managers from Boston-based Global Time Capital Management for insider trading on the $10.5 billion acquisition of Charter One by Royal Bank of Scotland.
Michael Tom, David Tom, Shengnan Wang and Hai Liu were the individuals specifically involved with insider trading. Wang and Liu invested $60,000 into a hedge fund that was being run by Tom.
The Massachusetts U.S. Attorney's Office also charged Wang and Liu for insider trading.
Wang communicated non-public information having to do with the acquisition to Liu and Tom. Tom then bought call options in Charter One for a personal account and for the hedge fund. When Citizens Financial Group announced the plans for the acquisition; Charter One's share prices grew by 22% to $43.86 a share in just one day.
Michael Tom made a total of $744,000 in profits as a result of the insider trading.
In addition, both Tom and Liu have tipped off their brothers, who also made profits. David Tom made $39,000, and Zheng Liu made $3,000. Zheng Liu has not been charged.