Feds Arrest Networking Company Exec in Insider Trading Sweep

Suspect allegedly arranged for insider information to get consulting gigs

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    NEWSLETTERS

    Don Chu leaves federal court in Manhattan.

    The FBI arrested a networking executive on insider trading charges this morning.

    U.S. Attorney Preet Bharara announced the arrest of Don Chu on conspiracy charges in connection with his employment at an "expert networking firm." The company is based in California but has an office in Manhattan.

    Chu, who was later released on $1 million bail, is an "Asia expert" for the company Primary Global Research, officials said. 

    Chu and his lawyer had no comment as they left court Wednesday.

    In an attempt to boost his PGR's consulting business, Chu allegedly arranged for insiders at publicly-traded companies to provide earnings-related information to his firm's hedge fund clients, leading to profitable securities transactions, officials said.

    The FBI moved in to arrest Chu out of fear that he was going to leave the country within days, authorities said.

    In late 2008, Chu established a relationship with former hedge fund employee Richard Choo-Beng. In late 2008 and early 2009, Lee's hedge fund was a client of Chu's firm.

    Lee's fund's practice was to have its employees call a PGR consultant just before the consultant's company released its quarterly earnings, in part to gain insider knowledge, the U.S. Attorney's office said.

    Choo-Beng began cooperating with a federal investigation into the PGR's activities in or about April 2009 and has since pleaded guilty to charges of conspiracy and securities fraud as part of a deal.

    Federal prosecutors have said they are planning a big crackdown on insider trading on Wall Street. This week, the FBI searched three hedge funds in New York, Boston and Stamford in connection with an ongoing insider trading investigation.

    Last year, billionaire hedge fund investor Raj Rajaratnam and nearly two dozen others colleagues were arrested in an insider-trading case. Rajaratnam denies any wrongdoing.