US v Newman Chiasson Horvath Kuo The ‘Bosses’
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Transcript of US v Newman Chiasson Horvath Kuo The ‘Bosses’
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8/3/2019 US v Newman Chiasson Horvath Kuo The Bosses
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Approved:ANTONIA M . A PP
REED BRODSKY
DAVID S. L EIB OWI TZ
RICHARD C. T A RL OWE
Assistant United States Attorneys
Befo r e : HONORABLE GABR IEL W. GORE NSTE IN
United States Magistrate Judge
Southern Distr ict of New Yo rk
UNITED STATE S OF AM ER ICA SEALED COMPLAINT
V io l a t i on s o f 1 8 U . S . C .
gg 2 , 371 ; 15 U . S . C . 55TODD NE~ , 78j (b) , 78f f ; 17 C.F .R.ANTHONY CHIASSON, 5 24 0 . 10 b - 5J ON HORVATH, a nd
DANNY KUO , COUNTY OF OF FE NSE :
NEW YORKDefen d a n t s .
DAVID MAKOL, being duly sworn, deposes and says that he
is a Speci.al Agent with the Federal Bureau of Investigation
("FBI") and charges as follows:
COUNT ONE
(Conspiracy to Commit Securities Fraud)
1 . Fr om i n or about 2008 t hr ough i n or abo ut 2009 , i nthe Southern Dis tric t of New York and el sew her e, TODD NEWM AN, JON
HORVATH, and DANN Y KUO , the def enda nts, and ot her s know n and
unknown, willfully and knowingly did combine, conspire,
confederate and agree together and with each other to commit an
offense against the United States, to wit, securities fraud, in
violation of Title 15, United States Code, Sections 78j (b)
78ff, and Titl e 17, Code of Fed eral Regulat ions , Sec tion 240.1 0b
5.
2. It was a part and object of the conspiracy that
TODD NEWMAN, JON HORV ATH , and DANNY KUO , the def end ants , and
others known and unknown, willfully and knowingly, directly and
indirectly, by the use of the means and instrumentalities of
interstate commerce, and of the mails, and of faci.lities of
national securities exchanges, would and did use and employ, in
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connection with tbe purchase and sale of securities, manipulative
and deceptive devices and contrivances in violation of Title 17,
Code of Federal Regulations, Section 240.10b-5 by: (a.) employing
devices, schemes and artifices to defraud; (b) making untrue
statements of material fact and omitting to state material facts
necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading; and( c) e n g a g i n g i n ac t s , p r a ct i. c e s a n d c o u r s e s o f b u s i n e s s w h i c hoperated and would operate as a fraud and deceit upon persons,
all in violation of Title 15, United States Code, Sections 78j(b)
and 78ff, and Tit le 17, Code of Fe deral Regul ati ons, Sect ion
240. 1 0 b- 5 .
Over t Ac t s
3 . I n fu r t h e r anc e o f t h e co n sp i r ac y and t o e f f ec t t h eillegal object thereof, TODD NE~ , JON HORVATH , and D~ KUO ,
tbe defendants, and their coconspirators committed tbe following
overt acts, among others, in the Southern District of New York
and e l s ewhere :
a. On or about August 5, 2008, a. coconspiratorsent NEWMAN an em ail that con tai ned mate rial , nonp ubl ic
information about Dell, Inc. (" Dell" ), a public company listed on
tbe Nasdaq Stock Mar ke t.
b . On o r abou t Au gu s t 25 , 2 008 , HORVATH se nt an
emai.l to a. portfolio manager that contained material, nonpublicinformation about De ll .
c. On o r about Fe br uary 10, .2009, KUO sent an
email to the portfoli.o manager for whom be worked containing
material, nonpublic information about Nvidia. Corporation
("Nvidia."), a public company li.sted on the Nasdaq Stock Market.
(Title 18, Uni ted State s Code, Section 37 1.)
COUNT TWO
(Conspiracy to Commit Securities Fraud)
4. F rom in or ab ou t 20 08 thr ough in or ab out 20 09, in
tbe Southern Dis tric t of New Yor k and else wher e, ANTH ONYCHIASSON, the defendant, and others known and unknown, wi.llfully
and knowingly did combine, conspire, confederate and agree
together and with each other to commit an offense against tbe
United States, to wit, securities fraud, in violation of
Title 15, United States Code, Sections 78j(b) E78ff, and. Title
17, Code of Federal Regulations, Section 240.10b-5.
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5. It was a part and object of tbe conspiracy that
ANTHONY CHIASSON , the defe nda nt, and oth ers known and. unknown,
willfully and knowingly, directly and indirectly, by tbe use of
the means and instrumentalities of interstate commerce, and of
t he ma i l s , and o f f a c i l i t i e s of n at i on al se cu r i t i es ex c h a n g es ,would and did use and employ, in connection with tbe purchase and
sale of securities, manipulative and deceptive devices andcontrivances in vi ol at ion of Ti tle 17, Code of Fe de ra l
R egul at i o n s , Sec t i on 24 0 . 1 0 b - 5 b y : (a . ) e m p l o y i n g d ev i c e s , s ch e m esand artifices to defraud; (b) making untrue statements of
material fact and omitting to state material facts necessary in
order to make the statements made, in tbe light of the
circumstances undex which they were made, not misleading; and (c)
engaging in acts, practices and courses of business which
operated and would operate as a fxaud. and deceit upon. persons,all in violation of Ti tle 15, Uni ted State s Code , Se cti ons 78j(b )
and 78ff, and Ti tle 17 , Code of Fe deral Regulatio ns, Se cti.on
2 40. 1 0b - 5 .
Ovex t Ac t s
6 . I n f u x t b e r an c e o f t h e c on s p i r a c y a nd t o ef f ec t t beillegal object the re of, ANTH ONY CHIAS SON, tbe def end ant , and bis
coconspirators commi.tted the following overt act, among others,
in. tbe Southern District of New York and elsewhere:
a. On. or about Aug ust 27, 20 08, CH IASSON
discussed material, nonpublic information about Dell during a.
telephone conversation.
(Title 18, Unite d Sta tes Code, Sec tion 37 1.)
COUNT THREE
( Secur i t i es Fr au d )
7. In o x ab ou t Au gus t 20 08, in the So ut hern Dis trict
of New Yoxk and el se whe re, TODD NEWN AN, the def end ant , wil lfully
and knowingly, dixectly and indirectly, by use of the means and
instrumentalities of in te rst ate comme rce, and of tbe ma ils and
tbe facilities of national securities exchanges, in connection
w it h t h e p u x c h a s e a n d s a l e o f s ec u r i t i e s , di d u s e a n d em p l o y
manipulative and deceptive devices and contxivances, in violationof Title 17, Code of Federal Regulations, Section 240.10b-5, by:
(a) employing devices, schemes and artifices to defraud; (b)
making untrue statements of material facts and omi.tting to state
matexi.al facts necessary in order to make the statements made, in
tbe light of the circumstances under wbi.ch they were made, not
misleading; and (c) engaging in acts, practices and courses of
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business which operated and would operate as a. fraud and deceit
upon persons, to wit, NEWMAN caused a hedge fund located in
Stamf ord, Connecticut to execute securities transactions in Dell
based on material, nonpublic information NEWMAN obtai.ned from a
coconsp i r a t o r .
(Title 15, Uni ted State s Code, Secti ons 78 j(b) 6 78f f;
Title 17, Code of Fe der al Regu latio ns, Sec tion 240. 10b-5 ,
and Title 18, United. States Code, Sect ion. 2.)
COUNT FOUR
( Secur i t i es Fr au d )
8 . I n o r a bo ut A ug u s t 2 0 0 8 , i n t h e So u t h e r n Di s t r i c tof New York and else whe re, ANTH ONY CHIA SSON , the defe ndan t,
willfully and knowingly, directly and indirectly, by use of the
means and instrumentalities of interstate commerce, and of the
mails and the facilities of national securities exchanges, in
connection with the purchase and sale of securiti.es, did use and
employ manipulative and deceptive devices and contrivances, in
violation of Title 17, Code of Federal Regulations, Section
2 40 .1 0b - 5 , b y : ( a ) emp l o y i n g d e vi c e s , sc h e m e s a n d a r t i f i .c e s t odefraud; (b) maki.ng untrue statements of materi.al facts and
omitting to state material facts necessary in order to make the
statements made, in the light of the circumstances under which
they were made, not misleading; and (c) engaging in acts,
practices and courses of business which operated and would
operate as a fraud and deceit upon persons, to wit, CHIASSON
caused a hedge fund located in New York, New York to execute
securities transactions in Dell based on material, nonpublic
i.nformation CHIASSON obtained from a coconspirator.
(Title 15, United States Code, Sections 78j(b) k 78ff;
Title 17, Code of Fe der al Regu lati ons, Sect ion 240 .10b -5,
and Title 18, Uni ted States Code , Sectio n 2. )
COUNT FIVE
( Secur i t i es Fr au d )
9. In o r ab ou t Au gus t 20 08, in the So uth ern Dis trict
of New York and els ewh ere, JON HORV ATH, th e def end ant, willfully
and knowingly, di.rectly and indirectly, by use of the means andi.nstrumentalities of interstate commerce,. and of the mails and
the facilities of national securiti.es exchanges, in, connection
with the purchase and sale of securiti.es, did use and employ
manipulative and deceptive devices and contrivances, in violation
of Title 17, Code of Federal Regulations, Section 240.10b-5, by:
(a) employing devices, schemes and. artifices to defraud; (b)
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making untrue statements of material facts and omitting to state
material facts necessary in order to make tbe statements made, in
the light of tbe circumstances under which they were made, not
misleading; and (c) engaging in acts, practices and courses of
business which operated and would operate as a. fraud and deceit
upon. persons, to wit, HORVATH caused a. hedge fund located in New
York, New York to execute securities transactions in Dell basedon material, nonpublic information HORVATH obtained from a.
c oconsp i r a t o r .
(Title 15, United States Code, Sections 78j(b) & 78ff;Title 17, Code of Fe der al Reg ulat ions, Sect ion 240. 10b -5,
and Title 18, Uni ted States Code , Sec tion 2 .)
COUNT SIX
( Secur i t i es Fr au d )
10. In or ab ou t Au gus t 200 8, in tbe Sou the rn Dis tric t
of New York and el sew here , DANNY KUO, tbe defen dant , wil lful ly
and knowingly, directly and indirectly, by use of the means and
instrumentalities of interstate commerce, and of tbe mails and
tbe facilities of national securities exchanges, in connection
with tbe purchase and sale of securities, did use and employ
manipulative and deceptive devices and contrivances, in violationof Title 17, Code of Fe der al Reg ula tions, Section 240 .10 b-5, by:
(a) employing devices, schemes and artifices to defraud; (b)
making untrue statements of material facts and omitting to state
material facts necessary in order to make tbe statements made, in
tbe light of the circumstances under which they were made, not
misleading; and (c) engaging in acts, practices and courses of
business which operated and would operate as a fraud and deceit
upon persons, to wit, KUO caused a hedge fund located in
California to execute securities transactions in Dell
based on material, nonpublic information KUO obtained from a
coconspi rator .
(Title 15, Uni ted St ate s Code , Secti ons 78j (b) &: 78ff;
Title 17, Code of Fe der al Reg ula tions, Sect ion 240. 10b- 5,
and Title 18, Uni ted States Code , Sec tion 2.)
Tbe bases for my knowledge and tbe foregoing charges
are, in part, as follows:
11. I h av e be en a Spe cia l Agent with tbe FBI fo r
approximately nine years. I am currently assigned to a squad
responsible for investigating violations of tbe federal
s ecur i t i es l aws a nd r e l a t ed o f f en s e s . I hav e pa r t i c i p a t ed i nnumerous investigations of such offenses and I have made and
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participated in making arrests of individuals for participating
i n s uc h o f f en s e s .
12. The information contained in this Complaint is
based upon my personal knowledge, as well as information obta.ined
during this investigation, directly or indirectly, from other
sources, including, but not limited to: (a) business records andother documents provided by various entities; (b) publicly
available documents; (c) analyses of court-authorized pen
register records and telephone toll records; (d) information,
documents, and other evidence provided by Jesse Tortora
("Tortora"); (e) information and other evidence provided by
Spyridon Adondakis, a/k/a, "Sam Adondakis" ("Adondakis"); (f)
information, documents and other evidence provided by Sandeep
Goyal, a/k/a. "Sandy Goyal"("Goyal"); (g) conversations with other
FBI agents and my review of reports prepared by other FBI agents;
and (b) business records and documents obtained in tbe execution
of search warrants on various hedge funds. Because this
Complaint is being submitted for the limited purpose of
establishing probable cause, it does not include all the facts
that I have learned during tbe course of my investigation. Where
the contents of documents and tbe actions and statements of and
conversations with others are reported herein, they are reported
in substance and in part. Where figures, calculations, and, dates
are set forth herein, they are approximate, unless stated
o the rw ise .
Relevant Entities
13. At all times relevant to this Complaint, Hedge
Fund A was an investment firm with its beadctuarters and principal
place of business located in Stamford, Connecticut.
1 4 . At a l l t i me s r e l e va n t t o t h i s Co m p l a i n t , Hed g eFund B was an investment firm with its principal place of
business located in. New York, New York.
15. A t al l ti mes rel evant to thi s Com pla int, Hedge
Fund C was an in ve st men t firm wit h its be adctuarters loca ted in
Stamford, Conn ecticut , and an of fic e located in New Yo rk, New
York.
1 6. At a l l t i mes r el ev a n t t o t h i s c a s e , I nv e s t m e n tFirm D was a wealth management company headguartered on tbe West
Coast, with an office in South Pasadena., California.
17 . At a l l t i mes r e l e va n t t o t h i s Co m p l a i n t , Del l wa sa technology company headquartered in Round Rock, Texas and
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listed on the Nasdaq Stock Market (ticker symbol: DELL).
Furthermore, at all times relevant to this Complaint, Dell's
policies prohibited the unauthorized disclosure of Dell's
confidential information.
1 8 . A t a l l t i me s r e l ev a n t t o t h i s Co mp l a i n t , Nv i d i a.
was a. technology company headguartered in Santa Clara,California, and li,sted on the Nasdaq stock market (ticker symbol:
NVDA). Furthermore, at all times relevant to this Complaint,
Nvidia.'s policies prohibited the unauthorized disclosure of
Nvidia's confidential information.
Relevant Indi vidua ls
19. At al l ti mes rel evant to this Com pla int, TODD
NEWMAN, the defenda nt, was a por tf olio manager at He dge Fund A.
20. At al l ti mes re levan t to thi s Com pla int, ANTH ONY
CHIASSON, the de fenda nt, was one of th e fo un der s of, and a.
portfolio manager at, Hedge Fund B.
21. A t all ti mes rel evant to thi s Com pla int, JON
HORVATH, the de fenda nt, was an an al yst at He dge Fund C, who
worked in the office located in New York, New York.
22. A t all ti mes re levan t to thi s Com pla int, DANNY
KUO, the defendant, was a fund manager who worked in the South
Pasadena off ice of Investment Firm D.
23. At all times relevant to this Complaint, Tortora
was an analyst at Hedge Fund A. During Tortora's employment at
Hedge Fund A, Tortora obtained material, nonpublic information
(" Inside Information" ) for the benefit of Hedge Fund A. As part
of this investigation, I and another agent approached Tortora in
an effort to obtain his cooperation. Tortora has since entered a.
guilty plea pursuant to a cooperation agreement to charges of
conspiracy and securities fraud. Tortora has been cooperating
with the Government in the hope of receiving a reduced sentence.
Certain information Tortora. has provided has proven to be
reliable and has been corroborated by, among other things, the
statements of other cooperating witnesses, consensually recorded
conversations and court authorized interceptions of telephone
calls, telephone records, trading records, documents provided by
Tortora, and electronic communications and other documents
obtained from Hedge Fund A and Hedge Fund B.
24. At all times relevant to this Complaint, Adondakis
was an analyst at Hedge Fund B. During Adondakis's employment at
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Hedge Fund B, Adondakis obtained Inside Infox'mation fox the
benefit of Hedge Fund B. As part of this investigation, I and
another agent approached Adondakis in an effort to obtain his
cooperation. Adondakis has since entered a guilty plea pursuant
to a cooperation agreement to charges of conspiracy and
securiti.es fraud. Adondakis has been cooperating with the
Government in the hope of receiving a reduced sentence. Certaininformation Adondakis has provided has proven to be xeliable and
has been corroborated by, among other things, the statements of
other cooperating witnesses, consensually recoxded conversations
and court authorized interceptions of telephone calls, telephone
records, trading records, and electronic communications and other
documents obtained from Hedge Fund A and Hedge Fund B.
25. A t all ti mes rel evant to thi s Com pla int, Goyal was
an associate analyst for a global asset management fi.rm
headquartered in New York, New. York ("investment Fi.rm 1"). Prior
to woxking at Investment Firm 1, Goyal worked for Dell in an
office located in Round Rock, Texas. During Goyal's employmentat investment Fir m 1, Go yal obtai.ned Inside Inf ormat ion fro m
employees of Dell. As part of this investigation, I and another
agent appxoached Goyal in an effort to obtain his cooperation.
Goyal has since entered a guilty plea pursuant to a cooperation
agreement to chaxges of conspiracy and securities fxaud. Goyal
has been cooperating with the Government in the hope of xeceiving
a reduced sentence. Certain information Goyal has provided has
proven to be reliable and has been corroborated by, among other
things, the statements of other cooperating witnesses, telephone
records, trading records, documents provided by Goyal, and
electronic communications and other documents obtained fxom Hedge
Fund A.
Overview Of The In si der Tr'adin S ch em e
26. As set forth in more detail below, I have probable
cause to believe that fxom at least in or about 2008 thxough in
or about 200 9, JON HORV ATH and DANNY KUO , the de fe ndants, alo ng
with Tortora. and Adondakis, were friends who worked as analysts
at various investment firms and who exchanged with each other
Inside Information obtained directly or indi.x'ectly from employees
of publicly-traded technology companies.
27. For example, from in or about 2008 through in or
about 2009, Tox tor a pr ovided to JON HO RVATH and DA NNY KUO , the
defendants, and Adondakis Inside Information regarding Dell's
financial condition, includi.ng gross margin information (the
"Dell Inside Information" ). Tortora had obtained this Inside
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information from Goyal, wbo, in turn, obtained the information
from an employee at Dell (the "Dell Insider" ). A t times, tbe
Dell Insider worked in Dell's investor relations department. As
set forth in more detail below, tbe Dell Insider at times
provided initial information concerning Dell's financial
condition prior to tbe close of tbe quarter, and provided more
specific information about Dell's quarterly results after the
close of tbe quarter but prior to Dell's public announcement of
those results . G oya l in fo rmed Tor tora that tbe Del l Ins ide
Information came from an employee at Dell. At various times when
Goyal provided tbe Dell In side Info rmat ion to To rto ra, Tort ora
was l o c a t e d i n New Yo r k , Ne w Yo r k .
28. S i m il ar ly, JON HORV ATH and DANN Y KUO , tbe
defendants, obtained inside Information, directly or indirectly,
from employees at one or more publicly-traded technology
companies and provided that Inside Information to Tortora and
others. A t t i me s, HOR VATH and KUO in for med Tor tora and /or
Adondakis that tbe Inside Information originated with one or more
employees at tbe respective technology companies.
29. Tortora also passed the Dell Inside Information toTODD NEWMAN, tbe def endant, for whom To rt ora wo rked at He dge Fun d
A. T o r to ra inf ormed NEWNAN that the Del l Ins ide Inf orma tion came
from Goyal, and that Goyal bad obtained tbe information from a,
source at Del l. NEWMA N ca use d Hedg e Fund A to ex ec ute sec urit ies
transactions based, in whole or in. part, on the Dell Inside
Information in adv ance of De ll's first and sec ond qua rter 2008
earnings announcements, resulting in approximately $3.8 mi.llion
in illegal profits.
30. A d o nd aki s pas sed tbe Del l Ins ide Inf orma tion to
ANTHONY CHIAS SON, tbe def endant , among oth ers at Hedge Fund B.
Adondakis infor med CHI ASSON that the Dell ins ide Inf orma tion came
from a source at Dell. CHIASSON, along with others at Hedge Fund
B, caused Hedge Fund B to execute securities transactions based
in whole or in part on the Dell Inside Information in advance of
Dell's first and second quarter 2008 earnings announcements,
r esu l t i ng i n app r ox i m a t e ly $57 m i l l i on i n i l l ega l p r o f i t s .
31. A f te r re ce iving the Del l Ins ide Inf orma tion from
Tortora, JON HOR VATH, the defen dant, cau sed Hedge Fund C to
execute securities transactions based in whole or in part on tbe
Dell inside Information in advance of Dell's second quarter 2008
earnings announcements, resulting in approximately $1,000,000 in
illegal profits for Hedge Fund C.
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32. A f te r re ce iving the Dell Ins ide Inf orm ation. from
Tortora, DANNY KUO , the def endant , cau sed Inv estment Fir m D to
execute securities transactions based in whole or in part on. the
Dell Inside Information in advance of Dell's second quarter 2008
earnings announcements, avoiding losses of approximately $78,000.
Hed e Fund A Pa s Go al For The 1n side Infoxm ation
33. Based on my interviews with Tortora and Goyal, my
conversations with other FBI agents and my review of reports
prepared by other FBI agents, my review of business records,
including emails, of Hedge Fund A, and my review of bank records,
I have learned that Hedge Fund A paid Goyal for information,
including the Dell Inside Information, via a purported consulting
arrangement with another individual (" Individual 1").
Specifically, I have learned the following:
a. In or a b ou t lat e 20 07, Tor tora and Goy al
discussed the possibility of Goyal receiving payment for
information that he was providing to Hedge Fund A.
b. Fol lowing this conversation, Tortora arranged
with TODD NEWMAN , the de fe nd ant , to pay Ind ivi.dual 1 as a
"consultant" for Hedge Fund A. The payment arrangement was
accompli. shed through soft dollars.'
d. Bus iness records of Hedge Fund A show that,
between in or ab out Feb ruary 2008 and in or abou t Se pt ember 2008 ,
Hedge Fund A caused four payments to be made to Individual 1 each
in the amount of $18,750. Th e reference note for each of the
four payments indicated that the payments were for
"Research/Consulting services to [Hedge Fund A], including Market
Research, Industry and Company Analysis, and Network with
industry contacts for the Semiconductors and IT Hardware
industries." Bank records for a joint account held by Qoyal and
Individual 1 (" the Qoyal Joint Account" ) reflect four deposits
e ac h i n t h e amo u n t o f $ 1 8 , 7 5 0 i n 2 0 0 8 .
e. O n or a b ou t De cem ber 22, 20 08, Tort ora sent
an email to Individual 1 stating: "Just wanted to let you know
"Soft dollar" payments occur when an investment firm
causes its trading activity to be directed through a designated
broker -dealer, so tha t the commissions or fees from the executed
trading activity of the firm can then be used to pay for goods
and services consumed by the investment firm, such as payment for
the services of a research consultant utilized by the firm.
10
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you will receive a. bonus for 100k for your service pxovided
through 9/30/08." In fa ct, according to Tortora and Goyal, at
least some of the $100,000 payment constituted an advance payment
to Goyal for Goyal to continue to supply information, including
tbe Dell Ins ide In forma tion, to Hedge Fund A in. 2009.
f. Bu siness records of Hedge Fund A reflect thatHedge Fund A caused a soft dollar payment of approximately
$100,000 to In di vi.dual 1 on or ab out Jan uax'y 12, 2009, with tbe
same reference note as the four quarterly payments set forth in
subparagraph (d) above. Bank account recoxds fox the Goyal Joint
Account reflect a deposit of approximately $100,000 on or about
J a nu ar y 2 9 , 2 0 09 .
g. According to Goyal and Tortora, Individual 1
never provided and was never expected to provide research
serv ice s t o Hedg e Fu nd. A.
Hedge Fund A Made Approximately $1 Million In Illegal Pxofits
Based On The Dell In side Inf oxm atio n ln Adv ance Of
Dell's Ma 2 9 20 08 E a rn in s An no un cem ent
34. Fxom my conversations with Tortoxa and Goyal, my
conversations with other FB1 agents and my review of reports
prepared by other FBI agents, my review of electronic
communications and other business xecords obtained fxom Hedge
Fund A and Hedge Fund B, my review of documents provided by
Tortora. and Goyal, my review of various telephone records and
trading records of Hedge Fund A, and representations made by
Hedge Fund A, I have leaxned that Qoyal provi.ded the Dell Inside
Information to To rt ora. in advance of De ll 's May 29 , 20 08
quarterly earnings announcement and that Tortora passed the Dell
Inside Informa tion to TODD NEWN AN, tbe de fen dan t. M ore
specifically, I have learned tbe following:
a. In advance of Dell's May 29, 2008 quarterly
earnings announcement, tbe Dell Insider provided to Goyal, wbo,
in turn, provided to Tortora Inside Information indicating that
Dell's gross margi.n numbers for tbe quarter ended April 30, 2008
would be higher than market expectations.
b. Tel ephone records indicate that on or aboutMay 15, 2008, at approximately 9:41 p.m., Qoyal and tbe Dell
Insider spoke by telephone for approximately 16 minutes.
Immediately tbexeafter, Goyal made a call to Toxtora that lasted
a few seconds. Tortora returned Goyal's call at approximately
10:26 p.m., and that call lasted approximately 8 minutes.
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c. The n ex t mo rn ing , on or abo ut May 16, 20 08 ,
at approximately 7:41 a.m., Tortora sent an email to Qoyal titled
"dell," which stated: "Hey Sandy let me know if you have a.
couple of minutes just to run through tbe model before the open
today." Tortora sent another email to Goyal at approximately
7 :53 a . m . w i t h t b e su bj e c t l i n e " r e : De l l , " st at i n g : " He y s t r eet
at 33, I get 36-37, let me know if you agree." Qoyal respondedto Tortora by email at approximately 8:28 a.m., stating "I get
around 36 too." Based on my conversations with Tortora. and
Goyal, to arrive at the numbers in these emails, which
represented "earnings per share" or "EPS" numbers for Dell's
stock, both Tortora. and Qoyal ins erted the Dell I ns id e
Information relayed by tbe Dell 1nsider into their respective
financial models for Dell. Tbe EPS number that they each
c al cu l a t e d , i . e . 3 6 c en t s , wa s h i gh e r t han t he ex p e c t a t i o ns o fthe market or tbe "s tre et" .
d. A lso on or ab out May 16 , 20 08, at
approximately 8:57 a,.m. shortly after the exchange of emails
described in subparagraph (c) above telephone records reflect a
call between Tortora's cellular phone and Goyal's office line
that lasted approximately 6 minutes. Immediately thereafter, at
approximately 9:03 a..m., telephone records reflect that Tortora
called NEWMAN's cellular phone and that call lasted approximately
two minutes. Telephone records also reflect an approximately 4
minute call between Tortora and NE~ 's office line at
approximately 9:17 a.m.
e. Base d on my review of trading records for
Hedge Fund A, I have le ar ned tha t on or ab out May 16 , 20 08 ,
between approximately 9:35 a.m. and 3:22 p.m., a. portfolio at
Hedge Fund A ove r wh ich NEW MAN bad inv estm ent dis cre tion
purchased approximately 475,000 shares of Dell, at a total cost
of approximately $10 million.
35. Based on my review of publicly available
information, 1 have learned that Dell publicly announced its
c(uarterly earnings results after tbe close of the market (at 4:00
p.m.) on May 29, 2008.' Within one trading day of Dell's May 29,
2008 quarterly earnings announcement, Dell's stock price
increased by more than 5-. over tbe previous day's close.
Dell's fiscal year ends January 31. Thus, Dell's first
quarter includes earnings for the months of February, March, and
April
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36. From my review of trading records for tbe
portfolio at Hed ge F und A ove r wh ich TODD NEWM AN, the def enda nt,
had investment discretion, I have learned tbe following:
a . Be t ween on o r abou t May 16 , 2 008 and. on o rabout May 29, 200S, NEW MAN executed or cause d to be exec ut ed, on
behalf of Hedge Fund A, a series of securities transactions thatresulted in the portfolio he managed holding a long position of
approximately 45 0, 000 sha res of Del l stoc k as of tbe close of the
market on or ab out May 29, 20 08 .
b. B etw e en on or abo ut May 29, 20 08, after tbe
close of the market, and on. or about June 3, 2008, Hedge Fund A
sold tbe 450, 000 share s it beld as of the cl ose of tbe ma xke t on
May 29 , 2008 .
c. Hedge Fund A realized an illegal profit of
approximately $1 million based on the sale of those 450,000
shares.
Hedge Fund A Ma de Approximately $2.8 Mi llion 1n
Illegal Pro fits Base d On The Dell I ns ide Infox mat ion
In Advance of De ll 's Au ust 28 200 8 Ea xn in s An no unc ement
37. Prom my convexsations with Tortora, Adondakis, and
Goyal, my conversations with other FBI agents and my review of
reports prepared by other FBI agents, and my review of electronic
communications and other business records obtained from Hedge
Fund A and Hedge Fund B, my review of documents provided by
Tortora., my review of various telephone records, my review oftrading records for Hedge Fund A, and xepresentations made by
Hedge Fund B, I ha ve le ar ned tha t, in advance of De ll 's Aug ust
28, 2008 quarterly earnings announcement, the Dell Inside
Infoxmation was passed from the Dell Insider to Goyal to Tortora
to TODD NEWMAN , the defe ndan t. M o r e sp ec if ica lly, I. have learned
tbe following:
a. Beg inning in or about July 2008, tbe Dell
Insider provided to Goyal initial information concerning Dell's
revenues and/or gross margin. Qoyal, in turn, provided this
information to Tortora. As the quarter progressed, Goyal
obtained and provided information indicating that Dell's grossmargin would be lower than market expectations.
b. Tel ephone records reflect that, on or about
July 2, 200S, at approximately 7:00 p.m., Goyal had a 31 minute
call with the Dell Insider. Tb e same evening, at approximately
10:43 p.m., Qoyal and Tortora spoke for 10 minutes. The next
morn ing, o n or abo ut Ju l y 3 , 2008, a t appr ox i ma te ly 8 :3 0 a .m. ,
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telephone rec ords ref lect that Tor tora calle d NEWPVX a t He dg e
Fund A and that call lasted approximately 13 minutes.
c. Based on my review of trading records for
Hedge Fund A, I have learned that, beginning at approximately
9:31 a.m. on or ab out July 3 , 20 08, the port folio at Hed ge Fund A
over which NEWN M h ad i n v es tment con trol sold short 225 ,00 0
share s o f De l l . '
d. A fter the close of Dell's second quarter in
2008, but prior to Dell's public earnings announcement, the Dell
Insider provided to Qoyal, and Qoyal, in turn, provided to
Tortora, more specific information concerning Dell's margins that
confirmed that Dell's gross margin would be lower than market
expecta t i on s .
e . Thus , on o r abou t Augu s t 4 , 200 8 , a t
approximately 10:23 a.m., Tortora. wrote an email to Goyal with
the subject "dell," in which Tortora requested that Goyal "keep
[Tortora] posted" if he heard "anything new." Qoyal responded to
the email at approximately 10:24 a.m. stating that he "plan[ed]
to check today evening." The same day, at approximately 8:55
p.m., telephone records reflect that Goyal spoke with the Dell
Insider by telephone for approximately 40 minutes.
f. T he n ex t da y, on or ab out Aug ust 5, 20 08, at
approximately 8:32 a.m., telephone records reflect that Tortora
received a, call from a phone number that I know to be assigned to
Investment Firm 1 (where Qoyal worked), which lasted
approximately 9 minutes. At approximately 8:39 a.m. that same
day, Tortora sent an email to NE~ which included the Dell
Inside Information. Tortora had received from Qoyal. The email,
with the subject "dell," stated:
Del l checks-Q [quarter]' finished on fri, numbers still
coming in-rev [Dell's quarterly revenue number] could be
s l i gh t l y ab ov e 1 6 B [ $ 16 b i l l i on ] , s t r ee t
A s ho r t s a l e i s t he sa l e o f a, se c u r i t y t h a t an i n ve st o rdoes not own or a sale which is consummated by the delivery of a,security borrowed by the investor.
Included in brackets are my interpretations of the
words/phrases that precede the brackets in the email. The
interpretations are based on my experience and/or my
conversations with Tortora.
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a t 1 5 . 9 [$15 . 9 b i l l i on ] , i mp l y i n g a 1' - . t o p l i nebeat-gm [gross margin] looking at 17.5-: vs street at
18.3., however could go higher as things get
r o l l e d u p-as of now, best guess 35c-36c [referring to
earnings per share] vs street at 36c-doesn't sound good, but still very prelim and
cou ld change-sounds like could be short after run and
DB preview that got expectations up
g. Fol lowing that email on or about August 5,
2008, Tortora. and NEWMAN cont inued to communi.cate by in stant
message ("IM") as follows:
(i) At approximately 8:40 a.m. (immediately
after receiving the email set forth above), NE~ sent an IM to
Tortora stating: "the Dell from sandy?"
(ii) Tortora responded at approximately 8:40
a.m.: "y on wi.th him him now." As set forth above, telephone
records reflect that Tor tora was on the tel eph one with I nve stment
Firm 1 (where Goyal worked) at the time of this IM communication.
(iii) At approximately 8:43 a.m., after
Tortora and Goyal ended their telephone conversation, Tortora
reported: "hey off now, so doesnt [sic] sound good, but still
need to monitor as always changes with rebates etc, but for now
its [sic] looking neg[,]" meaning that Dell's earnings would be
perceived negatively.
h. Bas ed on my review of trading records for
Hedge Fund A, I have le ar ned tha t on or ab out Au gu st 5, 20 08 ,
beginning at approximately 9:39 a.m., Hedge Fund A sold short an
addi t i on a l 1 8 0 , 0 00 s ha r e s o f De l l s t o ck . '
i . I n t h e d ay s b e f o r e t h e Au g u s t 2 8 , 2 0 0 8earnings announcement, Goyal had additional communications with
Tortora concerning Dell's financial condi.tion, including Dell's
gross margi.n, and confirmed that Dell's gross margin would be
By the end of the day on or about Jul y 24 , 20 08, NEWMAN
had closed out the short position he had previously started to
accumulate beginning on or about July 3, 2008, and did not hold
any position. in Dell between on or about July 25, 2008 and on or
abou t Augus t 5 , 2 00 8 .
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lower than market expectations. Tortora passed this information
on t o NE WMAN.
j. According to Tortora, Goyal's information was
particularly significant to the direction of Dell's stock price
because market expectations were positive as to Dell prior to the
second quarter 2008 earnings announcement.
38. From my review of publicly available information,
I have learned that Dell publicly announced its second quarter
earnings results (for the months of May, June, and July) after
t h e c l o s e o f t h e ma r k e t ( a t 4 : 0 0 p . m . ) o n A u g u s t 2 8 , 2 0 0 8 .
Within one trading day of Dell's second c(uarter earnings
announcement, Dell's stock price fell by approximately 13-: over
t he p r e v i o u s d ay ' s c l os e .
39. Based on my review of trading records for the
portfolio at Hed ge Fund A over whi ch TODD NEWMA N, the de fen dant ,
had investment discretion, I have learned the following:
a.. B et w ee n on or about July 3, 2008 , and the
close of the ma rket on or ab out Au gus t 28, 20 08, NEW MAN execute d
or caused to be executed, on behalf of Hedge Fund A, a series of
securities transactions that resulted in the portfolio he managed
holding a short position of approximately 700,000 shares of Dell
as of the close of the ma rke t on or ab out August 2 8, 200 8.
b . Be t ween on o r ab out Augu s t 29 , 2 008 and on o r
about September 4, 20 08, Hedge Fund A co ve red its ent ire short
position in Dell stock.
c. Add itionally, Hedge Fund A purchased put
opti.on contracts' in Dell between. on or about August 15, 2008 and
on. or about August 28, 2008, which Hedge Fund A sold on or about
Augus t 2 9 , 2 008 .
d. Hedge Fund A realized an. illegal profit of
approximately $2.8 million based on the securities transactions
described in this paragraph.
A put option. contract gi.ves the holder the of the
contract the right to sell a specified number of shares at a
speci. fied pri.ce by a certain date, known as the exercise date.
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Hedge Fund B Made Over g4 Million in Illegal Pxofits
Based On The Dell In side infor mation In Ad va nce Of
Dell's Ma 2 9 2 008 E a rn in s Ann oun cem ent
40. From my conversations with Tortora and Adondakis,
my conversations with other FBI agents and. my xeview of reports
prepared by other FBI agents, my review of electroniccommuni.cations and other business records obtained from Hedge
Fund A and Hedge Fund B, my review of telephone records, and my
review of trading records for Hedge Fund B, I have learned that,
in advance of Dell's May 29, 2008 quarterly earnings
announcement, Adondakis passed tbe Dell Inside Information to
ANTHONY CHIASSON, tbe defe ndant . M o re sp ec ific ally, I have
learned the following'.
a.. According to Adondakis, in advance of Dell's
May 29, 2008 quarterly earnings announcement, Tortora provided to
Adondakis information indicating that Dell's overall margin
numbers for tbe first quarter would be higher than market
expectati.ons. Adondakis passed the Dell Inside Infoxmation to
CHIASSON and Hedge Fund B executed securities transactions based
in part on that Inside Infoxmation.
b. Tel ephone records reflect that on or about
May 11, 2008, at app rox imat ely 8:57 p.m., the Dell Ins ider and
Goyal spoke by telephone fox appxoximately 32 minutes, and that,
latex that same night, at approximately 9:44 p.m., Goyal spoke to
Tortora by telephone for approximately 24 minutes. The next
morning, on or about May 12, 2008 at approximately 8:46 a.m.,
Toxtora sent an email to Adondakis with the subject "dell/amd",
which stated: "hey, lets fsicj catch up on dell and amd pxe-open
if free." Th e same day, at approximately 8:54 a.m. and at
approximately 9:41 a.m., telephone records reflect that Adondaki.s
bad two calls with Tortoxa. that lasted 14 and 8 minutes
respectively. At approximately 11:44 a.m. on or about May 12,
2008, telephone records reflect that Adondakis called CHIASSON's
office line at Hedge Fund B and that call lasted approximately 13
minutes .
c. Based on my review of trading records of
Hedge Fund B, I have leaxned that: (1) on or about May 12, 2008,
at appxoximately 3:41 p.m., Hedge Fund B purchased 3,500 Dell
call option contracts'; and (2) on ox about May 13, 2008, Hedge
Fund B puxch ased 175 ,000 shares of Dell sto ck .
A call option contract gi.ves tbe holder of tbe contract
the right to buy a certain number of shares at a. specified price
by a c e r t a i n da t e .
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d.. Similarly, after tbe series of telephone
calls and emails between Goyal and Tortora. on. or about Nay 15,
2008 and May 16 , 20 08 tha t are set forth in pa ra graph 34 abov e,
on ox' about May 16, 2008, at approximately 9:05 a.m., telephone
records reflect that Tortora called Adondakis at Hedge Fund B, in
a call that lasted approximately 9 minutes.
e. Based on my review of trading records ofHedge Fund B, I ha ve le ar ned tha t on or a bout Nay 16 , 20 08, at
approximately 9:29 .a.m., Hedge Fund. B purchased an additional
7 5 0, 00 0 s h a r e s o f De l l s t o c k .
41. Based on my review of trading. records of HedgeFund B, I have le ar ned tbe fol low ing :
a.. Bet ween on or ab ou t May 13 , 2 008 and on or
about May 28, 200 8, Hedge Fund B purc hased app rox ima tely 1.7
million shares of Dell stock. Hedge Fund B sold these shares
between on or about May 29, 2008, after the quar'terly earningsann ou n ce m en t , a n d o n o r a b o u t J u n e 2 , 2 0 0 8 .
b . On o r abou t Jun e 2 , 2008 , Hedge Fund B so l d
the 3,500 Dell call option contracts that it bad. puxchased on or
abou t May 12 , 2 0 08 .
c. Hedge Fund B realized an illegal profit of
over $4 million based on tbe securities transactions described
above.
Hedge Fund B Ma de Ov er $5 0 Mi ll i. on In Illegal Pro fi ts
Based On The De ll Ins ide Infor mat ion In Ad va nce Of
Dell's Au ust 28 20 08 Ea xni n s An no unc eme nt
42. From my conversations with Tortora and Adondakis,
my conversations with other FBI agents and my review of reports
prepared by other FBI agents, and my review of electronic
communications and other business and trading records obtained
from Hedge Fund A and Hedge Fund B, my review of various
telephone recox'ds, and repr ese ntations of He dge F und B, I ha ve
learned that, in ad van ce of De ll's August 28, 200 8 qua rte rly
earnings announcement, Adondakis passed the Dell Inside
Information to AN THON Y CHIA SSON , the def enda nt, among ot hers at
Hedge Fund B. Speci.fically, I have leaxned that:
a. Acc ording to Adondakis, Tortora provided
Adondakis tbe Dell Inside Information in advance of the Dell
second quarter earnings announcement. Speci.fically, Tortora told
Adondakis that Dell's gross margin for the second quarter would
be lower than market expectations. Adondakis provided this
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information to CHI ASS ON, infor ming bim tha t the info rma tion came
from a. source at Dell.
b . On or about J u l y 3 , 2008 , a t appr ox i ma te ly8:46 a.m., three minutes after Tortora. ended his conversation
with TODD NE~ , the def endant, see supra at $ 37(b), Tortora
sent an email to Adondakis stating that he bad "updates on delland semicap." Tb e next day, at approximately 5:46 p.m. and at
approximately 5:55 p.m., telephone records reflect that Tortora
bad two calls with Adondakis that lasted approximately 4 minutes
in total. Tortora bad another call with Adondakis on or about
July 7, 2008 at approximately 2:27 p.m. that lasted approximately
16 minutes, and a further call on July 8, 2008 at approximately
9:12 a.m. that lasted approximately six minutes.
c. Bas ed on my review of trading records for
Hedge Fund B, I ha ve lear ned that, on or. about July 8, 2008 at
approximately 9:33 a.m., Hedge Fund B sold short approximately
1 .4 5 m i l l i on s ha r e s of Del l s t o ck .
d. On o r a b ou t Au gus t 5, 20 08, at app roxi mately
8:41 a.m., Tortora forwarded to Adondakis (as well as to JON
HORVATH and DANNY KU O, the def endan ts) tbe email be bad sent to
TODD NE~ , tbe defendant, with the subject "dell" that
contained the information pertaining to Dell's gross margin. See
supra $ 37(f). Adondakis provided the information about Dell's
gross margins to CHIASSON and one or more other individuals atHedge Fund B. CH IA SSO N and. another individual at He dge Fund B '
(" Individual 2") instructed Adondakis to analyze tbe effect on
Dell's stock price based on the Dell Inside information Adondakis
b a d r e c e i v e d .
e. The reafter, Adondakis prepared tbe analysis
and, on or about Au gust 8, 20 08, met wit h CHI ASSON and Ind ivi dual
2 i n CHI A SSON' s o f f i c e t o d i s c u s s i t .
f. Bas ed on my review of trading records for
Hedge Fund B, on or abo ut Au gus t 11, 20 08, at approximately 10 :29
a.m., Hedge Fund B so ld sh ort an add itional 10 0, 000 sha res of
Dell stock, and purchased 5000 put option contracts in Dell, withexpiration dates of Se pt ember 25, 2008, a. date that was af ter
Dell's expected public earnings announcement.
g. Subs equently, CHIASSON additionally
instructed Adondakis to write up an .investment thesis for Dell
which supported the theory that gross margins would be "light,".
but which omitted the fact that tbe information came from a
contact at Dell. Adondakis prepared this analysis and sent it by
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email on or about August 15, 2008 at approximately 1:43 p.m. to
an email group at He dge Fund B tha t inc luded CHI ASS ON .
h. On or ab ou t Mo nd ay, Augus t 18 , 20 08, at
approximately 8:43 a.m., Tortora sent an email to Adondakis
stating: "Call me, I have an update for you today," referring to
an update with respect to the Dell Inside Information. Atapproximately 9:13 a.m., on or about August 18, 2008, telephone
records reflect that Tortora. and Adondakis spoke by telephone for
approximately 18 minutes. At the time, Adondakis was in
Cali.fornia attending a co nf erence with CHIASSON and In di vidual 2.
Adondakis met with C HIA SSON and Indiv idual 2 sh ort ly af ter his
call w3.th Tor tor a.
i. O n or ab ou t Au gus t 18, 20 08, beg inn ing at
approximately 3:29 p.m., CHIASSON exchanged a series of emailswith a. trader at Hedge Fun d B . ln th os e em ai ls, CHIASSO N
discussed the status of Hedge Fund B's short position in Dell and
instructed tbe trader to increase the short position in Dell.
j. Bas ed on my review of trading records for
Hedge Fund B, I have le ar ned tha t on or ab out Au gust 18 , 20 08
Hedge Fund B so ld short an add iti.onal 700,000 shares of De ll
stock.
k. On or ab ou t Au gus t 18, 20 08, CHIA SSON
exchanged a. series of emails regarding Dell with an individual
wbo worked at another investment firm (" Individual 3"). At
approximately 6:34 p.m., CHIASSON wrote to Individual 3: "Gm17.4-17.7." In d ivid ual 3 re sp onded : "But that's nearl y a. 1-' gm%
miss." ln a. subsequent email later that same evening, CHIASSON,
stated, among other things, that: "Ny call starts with gm."
l. On or ab ou t Au gus t 19, 20 08, CHI ASSO N,
Individual 2, and a trader at Hedge Fund B exchanged emails in
which they discussed i.ncreasing Hedge Fund. B's short position in
Dell and acquiring additional put option contracts in Dell.
m. Bas ed on my review of trading records for
Hedge Fund B, I have le ar ned tha t on or ab out Au gust 19 , 20 08
Hedge Fund B sold short an ad di tio nal 1, 150,000 sha res of De ll
stock and ace(uired an additional 5,900 put option contracts in
Del l .
On or about Augu st 27, 200 8, Ado nda kis
provided a further update on tbe Dell Inside Information to
CHIASSON, Indivi dual 2 and an ot her ind ivi dual at He dge Fund B
(" Individual 4") . Adondakis sent an email at approximately 12:49
p.m. to CHIASSON, Individual 2, and Individual 4 indi. cating that
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Adondakis had an update on Dell. Subsequent emails betweenAdondakis, CHIASS ON, Individual 2, and In di. vidual 4 con firme d
they were available for a telephone call shortly after
Adondakis's email.
o. Ac cording to Adondakis, that same day,
shortly after these emails were sent, Adondakis participated in atelephone call with CHI ASS ON, Indiv idual 2, and Ind ivi dual 4.
During tbe telephone call, Adondakis discussed the gross margin
information that Adondakis bad received from Tortora and the
market expectations as to Dell's gross margins.
p. Te l ephone records reflect a call on or about
August 27, 2008, at approximately 12:56 p.m., between Adondakis
and a telephone number assigned to Hedge Fund B that lasted
approximately 40 minutes.
q. At approximately 1:33 p.m. on or about August
27, 2008, Indivi dual 4 sent an IM to va ri ous trad ers at Hedg e
Fund B stati ng: "sbr t 250 del l" .
r. Based on my review of trading records forHedge Fund B, I ha ve le ar ned that on or a bout Au gust 27, 2008, at
approximately 1:34 p.m., Hedge Fund B placed. an order to sell
short an add iti onal 25 0, 000 shares of Del l sto ck .
43. From my review of trading records for Hedge Fund
B, I have lear ned that :
a . Be t ween on o r abou t Ju l y 8 , 2 008 , and on o r
about August 28 , 2008, Hedge Fund B accumul ate d a net sho rt
position in Dell stock of approximately 8.6 million shares.
Between on or about August 29, 2008 (the day after Dell's public
earnings announcement) and on or about September 16, 2008, Hedge
Fund B covered its entire short position in Dell.
b . Be t ween on o r abou t Augu s t 11 , 2 008 an d on o r
about August 26, 20 08, Hedge Fund B pu rc ha sed put opt ion
contracts in De ll , which Hedge Fund B sol d be tw een on or ab ou t
August 29, 2008 and on or ab out September 16, 20 08 .
c. Hedge Fund B realized an illegal profit of
approximately $53 million based on tbe securities transactions
desc r i bed above .
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Hedge Fund. C Made Appr oximately $1,0 00,000 I'n Illegal Profits
Based On The De ll Inside Informat ion In Adv ance Of
Dell's Au ust 28 2 008 Ea rn in s An nou nce men t
44. From my conver'sations with Tortora, my
conversations with other FBI agents and my review of reports
prepared by other PBI agents, my review of electroniccommunications records obtained from Hedge Fund A and. Hedge Fund
B, and provided by Hedge Fund C, my review of trading records for
Hedge Fund C, and my review of various telephone records, I have
learned that Tortora. provided tbe Dell Inside Information to JON
HORVATH, tbe de fe nd ant, in co nn ection. wi.tb Dell's Augus t 28, 20 08
quarterly earnings announcement. Specifically, I have learned
t h a t :
a . . On mu l t i p l e oc ca s i o n s i n 2 0 08 a n d 2 0 0 9 ,Tortora provided tbe Dell Ins ide Info rmation to HORV AT H.
b. Tel ephone records reflect a call on or about
July 3, 2008, at appr oxima tely 9:5 6 a. m., bet ween To rt ora. and
HORVATH's work telephone number that lasted approximately one
minute and another call at approximately 9:57 a.m. between
Tortora and. HORVATH's cel lular tel ephone that also la sted
approximately one minute.
c. On or ab out July 24, 2008, at approximately3:35 p.m., Tortora. sent an emai l to HORVATH and DANN Y KUO , the
defendants, and Adondakis, with tbe subject line: "PW: dell."'
Tbe email stated:
Del l checks:same messager ev f i n eo pex f i n egm could be an issue, will know more
in 2 we ek s
d. Te l ephone records reflect that on or about
July 24, 2008, between app rox imately 4:58 p.m . and 5 :01 p. m. ,
Tortora and HORVATH exchanged a series of text messages using
their cellular telephones.
On or about July 24, 2008, at approximately 1:23 a.m.,
telephone records reflect a call between Goyal and the Dell
Insider that lasted approximately 35 minutes. Additionally, at
approximately 3:15 p.m. that same day, telephone records reflect
a call between Tortora and Investment Firm 1 (where Goyal worked)
that lasted approximately four minutes.
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e . A s n o t e d ab ov e , o n o r a b ou t A u g u s t 5 , 2 0 0 8 ,at approximately 8:41 a.m., Tortora. sent an email containing tbe
Dell Inside Information to HORVATH. See supra $ 37(f).
f. Tel ephone records reflect a call between
Tortora and HORVA TH on or ab out Aug ust 6, 20 08 , at appr oxima tely
10:32 a.m., which lasted for approximately 6 minutes.
g. On or about August 18, 2008, at approximately
12:20 p.m., telephone records reflect a call between Tortora and
HORVATH that las ted app rox imately 10 min ute s. M inu te s la ter , at
approximately 12:34 p.m., telephone records reflect that HORVATHcalled the port folio manager at Hedge Fun d C f or wh om HO RVATH
worked (" Portfolio Manager 1") and they spoke for approximately 1
minute.
b. Bas ed on my review of trading records for
H edge Fun d C , I have learned that on or ab out Au gust 18 , 20 08, atapproximately 12:37 p.m., the portfolio over which Portfolio
Manager 1 had investment authority started to sell short shareso f D el l .
i. On or about August 25, 2008, at approximately
12:57 p.m. , Tor tora sen t an emai l to HORVATH, KUO, and. Adondakis
stating, in relevant part: "did new apple and dell checks today
and both sound bad, same as before, so no change to thinking.
Nell [si.c] catch up later." Shortly thereafter, at approximately
1:15 p.m., HORV ATH sen t an em ail to Po rt fo lio Mana ger 1 and
anothe r i n d i v i dua l , wi t h t b e sub j e ct l i n e " [Del l 1 ] s hor t I Rconvo." In t ha t em ai l, HORV ATH repo rted , in re lev ant par t, that
he bad bad a. "[v] ery short" call with Dell's Investor Relations
department, that he "would describe the tone as cranky with IR
saying didn't want to talk as it was is [si.c] too close to EPS
but I don't recall this being an issue before when I am only
asking them to go over housekeeping items (like what they've said
about restructuring progress etc)." In tbe same email, HORVATH
also noted that "JT also spoke with them again and his check was
unchanged."
j. Lat er tbe same day, at approximately 2:21p.m., HORVATH sent ano ther emai l to Por tfo lio Man ager 1 in whi ch
b e s t a t e d :
[T] be data is second hand but this contact was
correct in tbe last two quarters. JT did
d i f f ' t c h ec k s 7 / 3 , 7/ 24 , an d 8/ 5 a l l t h e wh i . l e
tbe message was revs small upside, opex in-line
but GMs under pressure but said be wasn't sure
magnitude until the final roll up. Then final
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read came thru on 8/18 and was 50-80 bps GMs
miss, revs small upside, and opex in line
netting out to EPS miss. I think investors
understand that GM will be down slightly q/q
and could. even miss consensus GM but I don' t
think they are expecting a big miss on GM. Not
a good set up to be long as I think DELLprobably has to show $0.02 upside for the stock
to go up after all these positive reviews.
k. On or ab out August 27, 2008, at approximately1:07 p.m., HORVATH sen t an em ail to Po rt folio Ma nager 1 and
another indivi.dual at Hedge Fund C with the subject "[DELL - 1]
EPS preview." The email stated: "I think we have roughly $6M
exposure here right now and I think we should increase it $1 2M
and possibly more if it [meaning Dell' s stock] rallies further
into the print." The emai.l further contained numbers for Dell's
earnings, including a. gross margin number of "17.7-. . Vs
s t r e e t . . . w i t h GM 1 8 . 3 ' - . . "
1. Th e sam e da y, on or ab out Au gus t 27, 200 8, at
approximately 1:11 p.m., Portfolio Manager 1 sent an email toHORVATH with the su bj ect line , "Dell acti on, " whi.ch stated: "Very
remiscient [sic] of last qtr, up everyday into the print. Were
[sic] near $10mln. Hav e u double checked JT this week?" H ORVATH
responded at approximately 1:15 p.m., stating: "Yes he checked in
a couple of days ago , sa me r ea d n o chan ge . "
45. Based on my review of trading records for Hedge
Fund C, I have learned the following:
a. . Be t ween on o r ab ou t Au gu s t 1 8 , 20 08 an d on o r
about August 28, 2008, the portfolio over which Portfolio Manager
1 had investment authority accumulated a net short position in
Dell stock as of 4:0 0 p.m. on or a bout Au gust 28, 20 08 of ove r
1 5 0, 0 0 0 s h a r e s . B e t w ee n o n o r a b o u t A u g u s t 2 9 , 2 0 0 8
and on or about Se pt ember 2, 20 08, Hedge Fun d C co ve red it s
entire short position in Dell.
b . Be t ween on o r ab ou t Au gu s t 1 9 , 20 08 an d on o rabout September 2, 2008, the portfolio over which Portfolio
Manager 1 had investment authori.ty aequi.red and subsequently
liquidated put option contracts in Dell.
c. Hed ge Fund C realized a profit of
appro xi m at e l y $1 , 000 , 0 0 0 b a s e d o n t h e s ecu r i t i e s t r an s ac t i on sdesc r i bed above .
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Investment Fi.rm D Avoided Los ses of App roxima tel y $7 8, 000
Based On The De ll Ins ide Information In Ad va nce Of
Dell's Au ust 28 2008 Ea rni n s An no unc eme nt
46. From my conversations with Tortora., my
conversations with other FBI agents and my review of reports
prepared by other FBI agents, my review of electroni.ccommunications records obtained from Hedge Fund A and Hedge Fund
B, and a review of electronic communications and other documents
provided by Investment Fi.rm D, my review of trading records for
Investment Firm D, and my review of various telephone records and
trading records, I have learned that Tortora provided the Dell
Inside Informat ion to DA NNY KUO, tbe de fen dant, i.n connection
with Dell's August 28, 2008 quarterly earnings announcement.
Specifically, I have learned that:.
a . On mu l t i p l e o c c a s i o n s i n 2 0 0 8 a nd 2 0 0 9 ,Tortora provided the De ll Insid e Info rmation to KUO .
b. On or ab ou t Jul y 3, 20 08, at app rox imat ely
11:50 a.m., after tbe series of calls described in paragraph
37(b) above, telephone records reflect a call between. Tortora. andKUO's work telephone number that lasted approximately 5 minutes.
c. Bas ed. on my review of trading records for
Investment Firm D, I have learned that tbe portfolio over which
tbe portfolio manager to whom KUO reported (" Portfolio Manager
2") bad investment discretion bad a long position of
approx imate l y 37 , 7 0 0 sh a r e s of Del l as of Jul y 7, 20 08 . On orabout July 8, 2008 and on or about July 9, 20 08 , tbe port folio
over which Portfolio Manager 2 had investment discretion sold
1,000 and 3,500 shares of Dell respectively.
d . A s n o t e d ab ov e , on o r ab o u t Au g u s t 5 , 2 0 0 8 ,at approximately 8:41 a.m., Tortora. sent an email containing the
Dell Inside Information to KUO. See supra $ 37 (f) .
e. Teleph one records reflect a series of short
calls on or about August 18, 2008, beginning at approximately
12:07 p.m., betw een To rt ora.'s cellular teleph one and KUO's
cellular telephone and work telephone.
f. Ba s ed. on my review of trading records for
Investment Firm D, I have learned that on or about August 18,
2008, at approximately 12:33 p.m., tbe portfolio over which
Portfolio Manager 2 had investment discretion sold an additional
9 , 30 0 s h ar e s o f De l l .
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g. On or about August 19, 2008, at approximately
10:15 p.m., after a series of emails discussing positive news for
another stock, KUO sent an email to Tortora stating in relevant
part: "do you think Dell will be fine as well then'P checks are
okay." Tortora responded by email at approximately 10:32 p.m.:
"No I told you yesterday about dell, call me tomorrow if you
fo rgo ' t " .
47. Based on my review of trading records for
Investment Firm D, I have learned the following:
a . Be t ween o n o r ab ou t Ju l y 8 , 2 008 and on o rabout August 28, 2008 , the por tfo lio over which Por tfo lio Nana ger
2 had investment authority sold approximately 28,495 shares of
Dell stock, avoiding losses of approximately $78,000.
KUO Pzovides Nvi dia ins ide Info rmation To The Cir cle of Anal s ts
48. Prom my conversations with Tortora and Adondakis,
my conversations with other FBI agents and my review of reports
prepared by other FB1 agents, my review of emails obtained from
Hedge Fund A and Hedge Fund B, my review of emails provided by
Hedge Fund C, In ve stm ent Firm D and To rt ora , I have le arned tha t
the following:
a.. As noted above, from at least in or about2008 through in or ab out 20 09, JON HORVA TH, DANNY KUO, the
defendants, Tortora and Adondakis exchanged Inside Information
concerning various publicly traded technology companies, whichthey each obtained directly or indirectly from sources at those
companies. This circle of friends exchanged the Inside
Information for the purpose of executing profitable securities' t ransac ' t ions .
b. Amo ng other information KUO shared within
this circle of friends, KUO provided Inside Information
concerning Nvi dia to To rto ra, Adon daki.s and HORVATH . A cco rd ing
to Tortora and Ad ond ak is, KUO info rmed them tha t the Nv idi a.
information came, directly or indirectly, from an insider at
Nv id ia .
c. Fo r example, on or about February 9, 2009 at
approximately 8:05 a.m., the day before Nvidia's public earnings
announcement, KUO sent an email to Portfolio Nanager 2 that
contained Inside Information concerning Nvidia. KUO immediately
forwarded this email to Tortora, Adondakis and HORVATH.
Specifically, that email stated:
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Check with an accounting manager at NVDA through a
friend of mine
Jan quar te r r evenu es a t $48 1N, d own 46 .4 - . qo qConsensus at $489M, down 45'; qoq [quarter over quarterj
NVDA preannounced the quarter and guided for revenues
t o d e c l i n e 4 0 - 5 0 -: q oqMy friend forgot to ask for GM [gross margin] but says
will call this guy again. today
No read on. gu i da nce
d . T h e n e x t d a y , on o r ab o u t F e br u a r y 1 0 , 2 0 0 9at approximately 12:26 p.m., KUO sent another email to Tortora,
Adondakis, and HOR VATH , whi ch stat ed, in rel evant pa rt: "NVDA Jan
Q GAAP GM will be 29 .4 %. "
e. S im i lar ly , on or abou t May 4, 20 09 at
approximately 9:50 a.m., KUO sent an email to Portfolio Manager
2, which KUO als o for war ded to Tor tora , Adon daki s and HORV ATH
stating, among other things:
NVDA check s ove r the we ekend , after the cl ose of
quar ter
April quarter revenues around $668 million
Came in better than the last read (mid April) due to
strong pickup in demand and unit shipment in the last
week of A pr i lApril quarter revenues were in line with ear'lier read
of $650-680M at the end of Na rc h
April qua rte r GM 30-:
f. Fu rth er , on or ab out Aug ust 6, 200 9 at
approximately 9:56 a.m., KUO sent an email to Portfolio Manager
2, which KUO als o forw arde d to To rto ra, Adon daki s and HORVA TH ,
stating, among other things:
NVDA checks fi nal rea d befor e the pr in t
Initial projections for July quarter was $750M and 33.5
34.5% GN and they cam e in a li tt le be tter on a. strongfinish to the quarter
J ul y q u a r t e r r ev e n u e s $ 7 7 7 NGAAP GM in th e 20'. range.
49. Based on my review of publicly available
information, I have learned the following:
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a. Nv i dia. publicly announced its quarterly
earnings results for the fourth quarter of fiscal year 2009 after
the close of the market (at 4:00 p.m.) on February 10, 2009.' In
that earnings announcement, Nvidia reported. fourth. quarter
revenues of $481.1 million and GAAP gross margins of 29.4
percent .
b. Nvi dia publicly announced its quarterly
earnings for the first quarter of fiscal year 2010 after the
c lose o f t he mar ke t (a t 4 :0 0 p .m . ) on Ma y 7 , 2009 . I n t ha tearnings announcement, Nvidia reported second quarter revenues of
$664.2 million and Non-GAAP gross margins of 30.6 percent.
c. Nv idia publicly announced its quarterly
earnings for the second quarter of fiscal year 2010 after the
c lose of the ma rke t (at 4: 00 p.m .) on Aug ust 6, 20 09 . In t h a t
earnings announcement, Nvidia reported second quarter revenues of
$776.5 million and GAAP gross margins of 20.2 percent.
WHEREFORE, depo nent pray s that arr est wa rr ants be
issued for the above-named defendants and at t hey be impri'soned
or bailed as the case may be.
DA MAKOLS ECIAL A GE NT
FEDERAL BUREAU OF IN VE ST IGA TION
Sworn to before me this
1 7TH ' day o f J anu a r y 201 2
0 LE 'G BR IE L W . ORENS TE IN
UNITED STATES MAG IST RATE JUD GE
SOUTHERN DIS TRICT OF NEW YO RK
Nvidia's fiscal year ends January 31. Thus, Nvidia's
fourth quarter includes earnings for the months of November,
December, an d J an u a r y .
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