Analyst Charged with Insider Trading after Leaking Apple Sales Projections
Research analyst John Kinnucan has recently been charged with two counts of security fraud and two counts of conspiracy for allegedly obtaining secret information about Apple and selling it for hundreds of thousands of dollars. According to Reuters
a civil case filed by the Securities Exchange Commission filed in the U.S. District Court of Manhattan carries the insider trading charge.
Kinnucan is being accused of leaking tips that he received from Apple suppliers such as SanDisk and Flextronics to hedge fund managers. According to the report, a source close to the government problem claims that the analyst received tips from Don Barnetson (former SanDisk executive), who pleaded guilty to conspiring to divulge company secrets on Friday. Barnetson even said that he “conspired with a consultant to provide confidential information with respect to my employer at the time, SanDisk Corp.”
As of right now investigors are claiming that Kinnucan paid sources between 2008 and 2010 to obtain confidential information including sales trends for the iPhone for the firm he worked at, Broadband Research. Kinnucan gained some notoriety in 2010 when it had been revealed that he had alerted former and current clients about the insider trading probe after refusing to cooperate with an FBI investigation. He then later defended his actions in a 2010 interview by claiming this his clients weren’t “some scummy fly-by-night hedge funds.” Kinnucan’s clients are believed to have made approximately $1.58 million off of illegal trading based on the tips he had provided while he allegedly made hundreds of thousands of dollars selling the information.
U.S. Attorney Preet Bharara said in a statement that "John Kinnucan used financial incentives, fancy meals and other inducements to curry favor with public company insiders so they would serve up their employers' secrets.” The federal probe called, Operation Perfect Hedge, has resulted in 60 people pleading guilty or being arrested according to the Reuters
report. Amongst those who pleaded guilty are several former executives at Apple suppliers including the former senior director of business development at Flextronics, who was charged for providing “highly confidential” sales forecasts and details for an unreleased iPhone.
It was previously revealed (in 2010) that a number of analysts covering Apple were being investigated by the SEC for their “channel checks” with Apple’s Asian supply chain. Many analysts defended the practice as an industry standard but the probe managed to catch quite a few who had crossed the line into insider trading through research.