Tiger Asia hedge funds to forfeit insider gains

December 12, 2012 - 9:33 PM

NEWARK, N.J. (AP) — An international hedge fund management company pleaded guilty Wednesday in a federal insider-trading case and is to pay more than $60 million to settle criminal and civil charges.

Sung Kook "Bill" Hwang pleaded guilty on behalf of Tiger Asia Management to one count of wire fraud; his company was placed on one year's probation.

Hwang, of Tenafly, founded and was the portfolio manager of Tiger Asia Management LLC and Tiger Asia Partners. The hedge funds, based in New York, specialized in Asian-traded equities.

"Tiger Asia regrets the actions for which it accepts responsibility today and is grateful that this matter is now resolved and behind it in the United States," the company said in a statement.

In the criminal case, authorities allege Hwang, 48, traded millions of shares of stock from two Chinese banks between December 2008 and January 2009 in violation of confidential agreements and an understanding that the stock not be put on the market.

Authorities say the companies tried to manipulate the price of the bank stocks in an attempt to make more money. In what is known as a short sale, Tiger Asia repurchased the stock, hoping to profit from a decline in its stock price, authorities allege.

"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 Fishman said. "This criminal activity by a hedge fund operator, one of the biggest in the world, is unacceptable."

Tiger Asia Management was founded in 2001 and known as a "Tiger Cub," spun off from Tiger Management Corp., authorities say. In the late 1990s, Tiger Management, which was headed by prominent billionaire investor Julian Robertson, was one of the world's largest hedge fund sponsors.

Authorities say Tiger Asia made more than $16 million from its illegal deals and must forfeit the money.

In the civil case, the Securities and Exchange Commission accused Hwang of conducting insider trading schemes, directing head trader Raymond Y.H. Park to make short sales and place losing trades to drive down stock prices and increase management fees. Park, of Riverdale, N.Y., also was accused of wrongdoing. Park agreed in a settlement with the SEC to pay $39,819 in restitution and interest, and a $34,897 civil fine. He neither admitted nor denied the allegations.

Park's attorney, Steven Glaser, said in a statement that his client "is happy to put this matter behind him."

The SEC alleged the companies made nearly $500,000 in management fees from the scheme. Under their settlement, Hwang and the two firms agreed to pay $44 million.

"Hwang today learned the painful lesson that illegal offshore trading is not off-limits from U.S. law enforcement, and tomorrow's would-be securities law violators would be well-advised to heed this warning," said Robert Khuzami, director of the SEC's Division of Enforcement.