A former TPG Capital employee and his cousin have been charged with generating more than $300,000 in illicit profits by trading on inside information about health care takeovers involving the private-equity firm.
The U.S. Securities and Exchange Commission said in a civil complaint there was “strong circumstantial evidence” that Yannan Liu and Zhichen Zhou engaged in insider trading earlier this month and in February 2014.
TPG was a bidder for two companies — MedAssets and Chindex — in which Zhou allegedly bought shares before it was made public that they would be acquired by private-equity firms.
Liu left TPG in May 2012 but, according to the SEC, his association with the firm “put him in a position to obtain material, nonpublic information” about the acquisitions of MedAssets and Chindex and he “maintains a personal relationship with at least one private-equity professional” who works for the firm in Beijing.
“[A]t the time Zhou purchased both MedAssets and Chindex stock … he was in possession of material, nonpublic information about both companies’ respective upcoming acquisitions, which information was provided to him by his cousin Liu, which he in tum acquired through his affiliation with TPG Capital,” the complaint says.
MedAssets, a Nasdaq-listed health care and technology services company based in Georgia, agreed to be acquired on Nov. 2 by Pamplona Capital Management in a deal worth roughly $2.7 billion including debt. The SEC alleges that between Oct. 22 and Oct. 26, 2015, Zhou purchased 38,479 shares of MedAssets for $885,377.94, representing more than four times his stated net worth.
Following the acquisition announcement, the SEC said, Zhou sold all the shares, realizing net profits of $299,425.21 as the stock rose more than 30% on Nov. 2.
In the case of Chindex, Zhou allegedly bought 3,350 of its shares, making a profit of $7,504.38 after it was announced on Feb. 17, 2014 that the company would be acquired by a private-equity consortium including TPG.
Liu told The Wall Street Journal, “There is some misunderstanding here and what I can tell you now is we are trying to communicate with [the] SEC for this matter.”