Reuters reports that Tom was charged with five counts of insider trading and prosecutors charge that the trades netted him $743,505 of illegal profits. Tom’s lawyer says he accepts responsibility and is expected to enter a formal plea in January.
He faces up to 10 years in prison and a $1 million fine, according to Reuters.
Until December 2003, Tom was a senior analyst at a Citizens unit that examined banks that Citizens wanted to acquire, according to court papers. He left to establish Global Time Capital Management LLC.
Prosecutors said Shengnan Wang, a Citizens analyst and investor in the hedge fund, called Tom on April 29, 2004 and told him that Citizens was conducting due diligence on a Cleveland-based bank that Citizens was about to buy. Tom bought securities for the hedge fund, his relatives and himself in each of three banks, including Charter One, that he believed might be the target, according to prosecutors. He made 52 purchases of stock and options in Charter One over the next three business days.
The day after Citizens said it would buy Charter One at a 23.7% premium, Charter One shares rose 22% and Tom sold most of the securities he had bought, according to court papers.
Wang and her husband pleaded guilty to insider trading charges in the matter in November and are awaiting sentencing.
Charges were filed against Tom by the Securities and Exchange Commission in September. Tom’s attorney would not discuss the terms of a plea agreement.