The founder of Canyon Bridge, a private equity firm that lost its $1.3 billion bid for Lattice Semiconductor after its funding was linked to the Chinese government, has been charged with insider trading, U.S. officials said.
The office of the Acting United States Attorney for the Southern District of New York charged Benjamin Chow for securities fraud on Monday. He allegedly gave a former colleague trading tips as he negotiated the Lattice deal, first as part of the state-backed China Reform Fund and then as managing partner of Canyon Bridge.
The indictment says that Chow met with his former colleague last spring in a coffee shop in the China World Trade Center in Beijing. After the initial meeting, his former colleague bought the first batch of shares in the Portland, Oregon-based Lattice.
Prosecutors say that Chow continued to urge his former colleague to stockpile share through in-person meetings, phone calls, and text messages for the next seven months. The hoard swelled to more than two and a half million shares. Chow’s co-conspirator sold the shares after Lattice announced the Canyon Bridge deal last October, making around $5 million on the scheme, according to the indictment.
“Chow’s illegal tips resulted in multimillion-dollar profits for his friend and business associate,” said Joon H. Kim, acting U.S. Attorney for the Southern District of New York, in a statement. Chow, a U.S. citizen born in China, faces up to 30 years in prison and a maximum fine of $5 million, prosecutors said.
The indictment did not name Chow’s former colleague, but the S.E.C. in February charged Michael Yin, a former executive at a Hong Kong-based private equity firm, for insider trading in connection with the Lattice deal. Yin has also been charged with insider trading after making $29 million buying and selling shares in DreamWorks.
The Lattice deal never went through. Canyon Bridge filed two applications with the Committee on Foreign Investment in the United States, also known as CFIUS, but the regulator shot down the financial firm twice. President Trump later blocked the deal in September on the grounds that Lattice’s chips could be used in missile defense radar systems.
The deal also stirred up the chip industry. During the regulatory review, Canyon Bridge’s co-founder, Ray Bingham, resigned from the board of Cypress Semiconductor after a lengthy proxy battle over potential conflicts of interest. Bingham, a former Cadence C.E.O., was also ousted from the board of Oracle, which does business with the U.S. government.
Chow’s indictment comes as Canyon Bridge sorts through a $742.5 million deal for Imagination Technologies. Canyon Bridge said that it plans to fan Imagination’s business out into China. On Tuesday, Imagination’s shareholders voted to approve the deal, which could give the firm a second life after losing Apple’s patronage this year.