Replies to post #1079 on The Securities and Exchange Commission (SEC)

[Stock]

LR-20106 May 8, 2007 Kan King Wong and Charlotte Ka On Wong Leung
See also: Complaint in this matter; Temporary Restraining Order
http://www.sec.gov/litigation/litreleases/2007/lr20106.htm

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20106 / May 8, 2007
SEC v. Kan King Wong and Charlotte Ka On Wong Leung, 07 Civ. 3628 (SAS) (S.D.N.Y. filed May 8, 2007)
Securities and Exchange Commission Obtains Asset Freeze in Connection With Trades in Dow Jones Securities Prior to Acquisition Announcement
Orders Placed From Foreign Accounts Just Prior to Acquisition Announcement; as much as $23 Million Frozen
On May 8, 2007, the United States District Court for the Southern District of New York entered a Temporary Restraining Order freezing assets of two Hong Kong residents, Kan King Wong and Charlotte Ka On Wong Leung, held at a branch office of Merrill Lynch & Co. in Hong Kong. The Commission's complaint alleges that the defendants engaged in illegal insider trading, in violation of the antifraud provisions of the federal securities laws. Among other relief, the court also imposed an expedited discovery schedule and prohibited the destruction of relevant documents.

According to the Commission's complaint, the defendants purchased 415,000 shares of Dow Jones common stock in their Merrill Lynch accounts between April 13 and April 30, 2007, for approximately $15 million. On May 1, 2007, Dow Jones stock price shot up 58% when it was disclosed publicly that News Corporation had made an offer to acquire Dow Jones for $60 per share — a substantial premium over the market price. On May 4, 2007, the defendants sold all 415,000 shares of Dow Jones common stock for a total of approximately $23 million and a profit of approximately $8 million. The Commission alleges that the defendants engaged in insider trading, in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission is seeking permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest thereon, and civil monetary penalties.

The Commission's investigation is continuing.

Complaint in this matter; http://www.sec.gov/litigation/complaints/2007/comp20106.pdf
Temporary Restraining Order http://www.sec.gov/litigation/litreleases/2007/lr20106-o.pdf



http://www.sec.gov/litigation/litreleases/2007/lr20106.htm



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I
UNITED STATES DISTRICT COURT
SOU THE^DISTRICT OF NEW YORK
1 MAY 00 2007
SECURITIESAND EXCHANGE ' ,
I
COMMISSION, bL .. . . ".* LC.. '
Plaintiff, Civil Action No.
Kan King Wong and
Charlotte Ka On Wong Leung,
Defendants.
COMPLAINT
Plaintiff Securities and Exchange Commission (Commission or SEC) alleges:
1. This is an insider trading case involving highly profitable and highly suspicious
purchases of Dow Jones Company, Inc. (DJ) common stock by defendants in an account at a
Hong Kong branch of Merrill Lynch & Co. (Merrill Lynch) fiom April 13,2007 through April
30,2007. These purchases were made in advance of a public announcement on May 1,2007,
that DJ had obtained an offer to be acquired by News Corporation (News Corp.) at a price of
$60.00 per share. As a result of the announcement, DJ's stock price jumped 58 percent over the
current day's opening price, placing defendants in a position to gain substantial profits on their
purchase of DJ stock. Defendants are residents of Hong Kong.
2. Upon information and belief, while in possession of material, non-public information
concerning the proposed, but unannounced offer to purchase DJ, fiom April 13 through 30,
2007, defendants purchased a total of 415,000 shares of DJ common stock. In advance of the
announcement, defendants engaged in widespread and unlawful trading activity and are in a position to yield approximately $8,183,423 in profits fiom their stock purchases. Defendants
, used their Merrill Lynch account to engage in their unlawful trading. If liquidated at current
market prices, defendants' profit on these trades would be approximately $8.1 million.
3. Upon information and belief, defendants made these trades while acting in
concert and pursuant to a common plan or scheme.
JURISDICTION AND VENUE
4. This Court possesses jurisdiction over this matter pursuant to Sections 21 (e), 2 1 A,
and 27 of the Securities Exchange Act of 1934 [15 U.S.C. $8 78u(e), 78u-1,78aa]. Venue lies in
this Court pursuant to Section 27 of the Securities and Exchange Act of 1934 (Exchange Act), 15
U.S.C. $ 78aa. Certain of the acts, practices, transactions, and courses of business occurred
within the Southern District of New York. For example, DJ stock is traded on the New York
Stock Exchange (NYSE) in New York, New York.
5. Defendants have directly or indirectly, made use of the instrumentalities of
interstate commerce, or of the mails, or the facilities of a national securities exchange in
connection with the acts, practices, transactions, and courses of business alleged in this
complaint.
6. Defendants will, unless restrained and enjoined, continue to engage in the acts,
practices, transactions, and courses of business alleged in this complaint, or in acts, practices,
transactions, and course of business of similar purport and object.
DEFENDANTS
7. Kan King Wong is a resident of Hong Kong. He resides at Flat C, 20/F, The
Albany, 1 Albany Road, Mid-Levels, Hong Kong. He is the part owner of an account with Merrill Lynch in Hong Kong in which 41 5,000 shares of DJ stock were purchased during the two
weeks prior to an announcement that News Corps. offered to acquire DJ.
8. Charlotte Ka On Wong Leung, the wife of Kan King Wong, is also a resident of
Hong Kong. She resides at Flat C, 20/F, The Albany, 1 Albany Road, Mid-Levels, Hong Kong
She is the part owner with her husband of an account with Merrill Lynch in Hong Kong in which
41 5,000 shares of DJ stock were purchased during the two weeks prior to an announcement that
News Corps. offered to acquire DJ.
RELEVANT ENTITIES
9. Merrill Lynch & Co. is a broker dealer registered with the Commission based in
New York, New York with locations world-wide.
10. Dow Jones Company, Inc. is a Delaware corporation headquartered at 200 Liberty
Street, New York, New York. DJ is a provider of global business and financial news through
multiple channels of media, including The Wall Street Journal, Barrons, Dow Jones Newswires,
Dow Jones Indexes and MarketWatch.com. Dow Jones securities are traded on the NYSE.
FACTUAL ALLEGATIONS
1 1. On May 1,2007, at approximately 11 :00 a.m. EST, News Corp. announced that it
would offer to acquire DJ in a deal worth $60.00 per share. On the morning of May 1,2007, the
opening price for DJ common stock was $37.12 per share. Following the announcement later
that morning, the price of DJ common stock increased to $57.28 per share, a 58 percent increase.
Prior to May 1,2007, the acquisition was confidential, non-public information.
12. During April 13,2007 through April 30,2007, while in possession of material,
non-public information regarding the offer to buy DJ by News Corps., defendants purchased
41 5,000 shares of DJ stock at a cost of $15,023,215. At the close of the market on May 4,2007,
3
the 41 5,000 shares were worth approximately $23 million and the net profit that defendants
could realize on the shares was $8,183,423.
13. Defendants did not have all of the funds available in their Merrill Lynch account to
purchase all 415,000 shares of DJ stock on April 13,2007. Instead, defendant wired $3,188,600
to their Merrill Lynch account on April 18,2007, fi-om an individual named Leung Kai Hung
Michael, the father of defendant Charlotte Ka On Wong Leung. On April 20,2007, defendants
wired $3,986,727 to their Merrill Lynch account fiom JP Morgan Int'l Bank in Brussels,
Belgium. Finally, on May 3,2007, after defendants purchased the shares, two margin loans in
the amounts of $335,157 and $4,500,000 were deposited into their Merrill Lynch account.
14. On May 4,2007, defendant Kan King Wong placed an order to sell all 415,000
shares of DJ stock held in their Merrill Lynch account in Hong Kong. Upon information and
belief at the time defendant Kan King Wong placed his sale order he inquired of his broker how
long it would take for the proceeds of the sale to be available in his account. The sale of these
shares will yield defendants $23,206,638 and net them a profit of 8,183,423.
CLAIM FOR RELIEF
Violations of Exchange Act Section lob and Rule 10b-5 Promulgated Thereunder
15. Paragraphs 1 through 14 are realleged an incorporated by reference.
16. Upon information and belief, at the time defendants purchased the 41 5,000 shares
of DJ stock they were in possession of material non-public information about the offer of News
Corps. to acquire DJ. Defendants knew, or had reason to know, or recklessly disregarded the
fact that (a) their trading was in breach of fiduciary duties or similar duties of trust and
confidence owed to the shareholders of DJ or to the source fi-om whom they received the
material non-public information; or (b) material non-public information about the acquisition
4
had been communicated to defendants in breach of fiduciary or similar duty of trust and
confidence.
17. Defendants have the opportunity to make aggregate illegal profits because the
value of the stock that they purchased, as set forth above, rose in response to the announcement
of the proposed acquisition.
18. By reason of the foregoing, defendants, directly and indirectly, violated Section
lo@) of the Exchange Act [15 U.S.C. 5 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. 5 240.10b-
51, and are likely to commit such violations in the future unless enjoined fiom doing so.
RELIEF SOUGHT
WHEREFORE, the Commission respectfully requests that the Court enter a judgment:
I.
Permanently restraining and enjoining defendants, their agents, servant, employees,
attorneys-in-fact, and all person in active concert or participation with them who receive actual
notice of the injunction by personal service or otherwise, and each of them, fiom violating
Section 10(b) of the Exchange Act [15 U.S.C. 5 78j@)] and Rule 10b-5 thereunder [17 C.F.R. 5
240.1Ob-51;
11.
Ordering defendants to disgorge all profits realized fiom the unlawful trading alleged
herein, with prejudgment interest;
111.
Ordering defendants to pay civil monetary penalties pursuant to Section 21A of the
Exchange Act 115 U.S.C. 78U-11; and
IV.
Granting such other relief as this Court deems just and proper.
Dated: May 8,2007
Respectfully submitted,
,
Reid Muoio (RM-2274)
/ r J M. Folena @ro hac vice pending)
J on Anthony
ttorneys for Plaintiff u Securities and Exchange Commission
Division of Enforcement
100 F Street, N.E.
Washington, D.C. 20549- 1040
Telephone: [phone] (Folena)
Facsimile: [phone] (Folena)
[e-mail]