us v newman chiasson horvath kuo the ‘bosses’

8/3/2019 US v Newman Chiasson Horvath Kuo The Bosses

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Approved:ANTONIA M . A PP

REED BRODSKY

DAVID S. L EIB OWI TZ

RICHARD C. T A RL OWE

Assistant United States Attorneys

Befo r e : HONORABLE GABR IEL W. GORE NSTE IN

United States Magistrate Judge

Southern Distr ict of New Yo rk

UNITED STATE S OF AM ER ICA SEALED COMPLAINT

V io l a t i on s o f 1 8 U . S . C .

gg 2 , 371 ; 15 U . S . C . 55TODD NE~ , 78j (b) , 78f f ; 17 C.F .R.ANTHONY CHIASSON, 5 24 0 . 10 b - 5J ON HORVATH, a nd

DANNY KUO , COUNTY OF OF FE NSE :

NEW YORKDefen d a n t s .

DAVID MAKOL, being duly sworn, deposes and says that he

is a Speci.al Agent with the Federal Bureau of Investigation

("FBI") and charges as follows:

COUNT ONE

(Conspiracy to Commit Securities Fraud)

1 . Fr om i n or about 2008 t hr ough i n or abo ut 2009 , i nthe Southern Dis tric t of New York and el sew her e, TODD NEWM AN, JON

HORVATH, and DANN Y KUO , the def enda nts, and ot her s know n and

unknown, willfully and knowingly did combine, conspire,

confederate and agree together and with each other to commit an

offense against the United States, to wit, securities fraud, in

violation of Title 15, United States Code, Sections 78j (b)

78ff, and Titl e 17, Code of Fed eral Regulat ions , Sec tion 240.1 0b

5.

2. It was a part and object of the conspiracy that

TODD NEWMAN, JON HORV ATH , and DANNY KUO , the def end ants , and

others known and unknown, willfully and knowingly, directly and

indirectly, by the use of the means and instrumentalities of

interstate commerce, and of the mails, and of faci.lities of

national securities exchanges, would and did use and employ, in


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connection with tbe purchase and sale of securities, manipulative

and deceptive devices and contrivances in violation of Title 17,

Code of Federal Regulations, Section 240.10b-5 by: (a.) employing

devices, schemes and artifices to defraud; (b) making untrue

statements of material fact and omitting to state material facts

necessary in order to make the statements made, in the light of

the circumstances under which they were made, not misleading; and( c) e n g a g i n g i n ac t s , p r a ct i. c e s a n d c o u r s e s o f b u s i n e s s w h i c hoperated and would operate as a fraud and deceit upon persons,

all in violation of Title 15, United States Code, Sections 78j(b)

and 78ff, and Tit le 17, Code of Fe deral Regul ati ons, Sect ion

240. 1 0 b- 5 .

Over t Ac t s

3 . I n fu r t h e r anc e o f t h e co n sp i r ac y and t o e f f ec t t h eillegal object thereof, TODD NE~ , JON HORVATH , and D~ KUO ,

tbe defendants, and their coconspirators committed tbe following

overt acts, among others, in the Southern District of New York

and e l s ewhere :

a. On or about August 5, 2008, a. coconspiratorsent NEWMAN an em ail that con tai ned mate rial , nonp ubl ic

information about Dell, Inc. (" Dell" ), a public company listed on

tbe Nasdaq Stock Mar ke t.

b . On o r abou t Au gu s t 25 , 2 008 , HORVATH se nt an

emai.l to a. portfolio manager that contained material, nonpublicinformation about De ll .

c. On o r about Fe br uary 10, .2009, KUO sent an

email to the portfoli.o manager for whom be worked containing

material, nonpublic information about Nvidia. Corporation

("Nvidia."), a public company li.sted on the Nasdaq Stock Market.

(Title 18, Uni ted State s Code, Section 37 1.)

COUNT TWO

(Conspiracy to Commit Securities Fraud)

4. F rom in or ab ou t 20 08 thr ough in or ab out 20 09, in

tbe Southern Dis tric t of New Yor k and else wher e, ANTH ONYCHIASSON, the defendant, and others known and unknown, wi.llfully

and knowingly did combine, conspire, confederate and agree

together and with each other to commit an offense against tbe

United States, to wit, securities fraud, in violation of

Title 15, United States Code, Sections 78j(b) E78ff, and. Title

17, Code of Federal Regulations, Section 240.10b-5.


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5. It was a part and object of tbe conspiracy that

ANTHONY CHIASSON , the defe nda nt, and oth ers known and. unknown,

willfully and knowingly, directly and indirectly, by tbe use of

the means and instrumentalities of interstate commerce, and of

t he ma i l s , and o f f a c i l i t i e s of n at i on al se cu r i t i es ex c h a n g es ,would and did use and employ, in connection with tbe purchase and

sale of securities, manipulative and deceptive devices andcontrivances in vi ol at ion of Ti tle 17, Code of Fe de ra l

R egul at i o n s , Sec t i on 24 0 . 1 0 b - 5 b y : (a . ) e m p l o y i n g d ev i c e s , s ch e m esand artifices to defraud; (b) making untrue statements of

material fact and omitting to state material facts necessary in

order to make the statements made, in tbe light of the

circumstances undex which they were made, not misleading; and (c)

engaging in acts, practices and courses of business which

operated and would operate as a fxaud. and deceit upon. persons,all in violation of Ti tle 15, Uni ted State s Code , Se cti ons 78j(b )

and 78ff, and Ti tle 17 , Code of Fe deral Regulatio ns, Se cti.on

2 40. 1 0b - 5 .

Ovex t Ac t s

6 . I n f u x t b e r an c e o f t h e c on s p i r a c y a nd t o ef f ec t t beillegal object the re of, ANTH ONY CHIAS SON, tbe def end ant , and bis

coconspirators commi.tted the following overt act, among others,

in. tbe Southern District of New York and elsewhere:

a. On. or about Aug ust 27, 20 08, CH IASSON

discussed material, nonpublic information about Dell during a.

telephone conversation.

(Title 18, Unite d Sta tes Code, Sec tion 37 1.)

COUNT THREE

( Secur i t i es Fr au d )

7. In o x ab ou t Au gus t 20 08, in the So ut hern Dis trict

of New Yoxk and el se whe re, TODD NEWN AN, the def end ant , wil lfully

and knowingly, dixectly and indirectly, by use of the means and

instrumentalities of in te rst ate comme rce, and of tbe ma ils and

tbe facilities of national securities exchanges, in connection

w it h t h e p u x c h a s e a n d s a l e o f s ec u r i t i e s , di d u s e a n d em p l o y

manipulative and deceptive devices and contxivances, in violationof Title 17, Code of Federal Regulations, Section 240.10b-5, by:

(a) employing devices, schemes and artifices to defraud; (b)

making untrue statements of material facts and omi.tting to state

matexi.al facts necessary in order to make the statements made, in

tbe light of the circumstances under wbi.ch they were made, not

misleading; and (c) engaging in acts, practices and courses of


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business which operated and would operate as a. fraud and deceit

upon persons, to wit, NEWMAN caused a hedge fund located in

Stamf ord, Connecticut to execute securities transactions in Dell

based on material, nonpublic information NEWMAN obtai.ned from a

coconsp i r a t o r .

(Title 15, Uni ted State s Code, Secti ons 78 j(b) 6 78f f;

Title 17, Code of Fe der al Regu latio ns, Sec tion 240. 10b-5 ,

and Title 18, United. States Code, Sect ion. 2.)

COUNT FOUR


8 . I n o r a bo ut A ug u s t 2 0 0 8 , i n t h e So u t h e r n Di s t r i c tof New York and else whe re, ANTH ONY CHIA SSON , the defe ndan t,

willfully and knowingly, directly and indirectly, by use of the

means and instrumentalities of interstate commerce, and of the

mails and the facilities of national securities exchanges, in

connection with the purchase and sale of securiti.es, did use and

employ manipulative and deceptive devices and contrivances, in

violation of Title 17, Code of Federal Regulations, Section

2 40 .1 0b - 5 , b y : ( a ) emp l o y i n g d e vi c e s , sc h e m e s a n d a r t i f i .c e s t odefraud; (b) maki.ng untrue statements of materi.al facts and

omitting to state material facts necessary in order to make the

statements made, in the light of the circumstances under which

they were made, not misleading; and (c) engaging in acts,

practices and courses of business which operated and would

operate as a fraud and deceit upon persons, to wit, CHIASSON

caused a hedge fund located in New York, New York to execute

securities transactions in Dell based on material, nonpublic

i.nformation CHIASSON obtained from a coconspirator.

(Title 15, United States Code, Sections 78j(b) k 78ff;

Title 17, Code of Fe der al Regu lati ons, Sect ion 240 .10b -5,

and Title 18, Uni ted States Code , Sectio n 2. )

COUNT FIVE


9. In o r ab ou t Au gus t 20 08, in the So uth ern Dis trict

of New York and els ewh ere, JON HORV ATH, th e def end ant, willfully

and knowingly, di.rectly and indirectly, by use of the means andi.nstrumentalities of interstate commerce,. and of the mails and

the facilities of national securiti.es exchanges, in, connection

with the purchase and sale of securiti.es, did use and employ

manipulative and deceptive devices and contrivances, in violation

of Title 17, Code of Federal Regulations, Section 240.10b-5, by:

(a) employing devices, schemes and. artifices to defraud; (b)


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making untrue statements of material facts and omitting to state

material facts necessary in order to make tbe statements made, in

the light of tbe circumstances under which they were made, not


business which operated and would operate as a. fraud and deceit

upon. persons, to wit, HORVATH caused a. hedge fund located in New

York, New York to execute securities transactions in Dell basedon material, nonpublic information HORVATH obtained from a.

c oconsp i r a t o r .

(Title 15, United States Code, Sections 78j(b) & 78ff;Title 17, Code of Fe der al Reg ulat ions, Sect ion 240. 10b -5,

and Title 18, Uni ted States Code , Sec tion 2 .)

COUNT SIX


10. In or ab ou t Au gus t 200 8, in tbe Sou the rn Dis tric t

of New York and el sew here , DANNY KUO, tbe defen dant , wil lful ly

and knowingly, directly and indirectly, by use of the means and

instrumentalities of interstate commerce, and of tbe mails and

tbe facilities of national securities exchanges, in connection

with tbe purchase and sale of securities, did use and employ

manipulative and deceptive devices and contrivances, in violationof Title 17, Code of Fe der al Reg ula tions, Section 240 .10 b-5, by:

(a) employing devices, schemes and artifices to defraud; (b)

making untrue statements of material facts and omitting to state

material facts necessary in order to make tbe statements made, in

tbe light of the circumstances under which they were made, not


business which operated and would operate as a fraud and deceit

upon persons, to wit, KUO caused a hedge fund located in

California to execute securities transactions in Dell

based on material, nonpublic information KUO obtained from a

coconspi rator .

(Title 15, Uni ted St ate s Code , Secti ons 78j (b) &: 78ff;

Title 17, Code of Fe der al Reg ula tions, Sect ion 240. 10b- 5,

and Title 18, Uni ted States Code , Sec tion 2.)

Tbe bases for my knowledge and tbe foregoing charges

are, in part, as follows:

11. I h av e be en a Spe cia l Agent with tbe FBI fo r

approximately nine years. I am currently assigned to a squad

responsible for investigating violations of tbe federal

s ecur i t i es l aws a nd r e l a t ed o f f en s e s . I hav e pa r t i c i p a t ed i nnumerous investigations of such offenses and I have made and


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participated in making arrests of individuals for participating

i n s uc h o f f en s e s .

12. The information contained in this Complaint is

based upon my personal knowledge, as well as information obta.ined

during this investigation, directly or indirectly, from other

sources, including, but not limited to: (a) business records andother documents provided by various entities; (b) publicly

available documents; (c) analyses of court-authorized pen

register records and telephone toll records; (d) information,

documents, and other evidence provided by Jesse Tortora

("Tortora"); (e) information and other evidence provided by

Spyridon Adondakis, a/k/a, "Sam Adondakis" ("Adondakis"); (f)

information, documents and other evidence provided by Sandeep

Goyal, a/k/a. "Sandy Goyal"("Goyal"); (g) conversations with other

FBI agents and my review of reports prepared by other FBI agents;

and (b) business records and documents obtained in tbe execution

of search warrants on various hedge funds. Because this

Complaint is being submitted for the limited purpose of

establishing probable cause, it does not include all the facts

that I have learned during tbe course of my investigation. Where

the contents of documents and tbe actions and statements of and

conversations with others are reported herein, they are reported

in substance and in part. Where figures, calculations, and, dates

are set forth herein, they are approximate, unless stated

o the rw ise .

Relevant Entities

13. At all times relevant to this Complaint, Hedge

Fund A was an investment firm with its beadctuarters and principal

place of business located in Stamford, Connecticut.

1 4 . At a l l t i me s r e l e va n t t o t h i s Co m p l a i n t , Hed g eFund B was an investment firm with its principal place of

business located in. New York, New York.

15. A t al l ti mes rel evant to thi s Com pla int, Hedge

Fund C was an in ve st men t firm wit h its be adctuarters loca ted in

Stamford, Conn ecticut , and an of fic e located in New Yo rk, New

York.

1 6. At a l l t i mes r el ev a n t t o t h i s c a s e , I nv e s t m e n tFirm D was a wealth management company headguartered on tbe West

Coast, with an office in South Pasadena., California.

17 . At a l l t i mes r e l e va n t t o t h i s Co m p l a i n t , Del l wa sa technology company headquartered in Round Rock, Texas and


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listed on the Nasdaq Stock Market (ticker symbol: DELL).

Furthermore, at all times relevant to this Complaint, Dell's

policies prohibited the unauthorized disclosure of Dell's

confidential information.

1 8 . A t a l l t i me s r e l ev a n t t o t h i s Co mp l a i n t , Nv i d i a.

was a. technology company headguartered in Santa Clara,California, and li,sted on the Nasdaq stock market (ticker symbol:

NVDA). Furthermore, at all times relevant to this Complaint,

Nvidia.'s policies prohibited the unauthorized disclosure of

Nvidia's confidential information.

Relevant Indi vidua ls

19. At al l ti mes rel evant to this Com pla int, TODD

NEWMAN, the defenda nt, was a por tf olio manager at He dge Fund A.

20. At al l ti mes re levan t to thi s Com pla int, ANTH ONY

CHIASSON, the de fenda nt, was one of th e fo un der s of, and a.

portfolio manager at, Hedge Fund B.

21. A t all ti mes rel evant to thi s Com pla int, JON

HORVATH, the de fenda nt, was an an al yst at He dge Fund C, who

worked in the office located in New York, New York.

22. A t all ti mes re levan t to thi s Com pla int, DANNY

KUO, the defendant, was a fund manager who worked in the South

Pasadena off ice of Investment Firm D.

23. At all times relevant to this Complaint, Tortora

was an analyst at Hedge Fund A. During Tortora's employment at

Hedge Fund A, Tortora obtained material, nonpublic information

(" Inside Information" ) for the benefit of Hedge Fund A. As part

of this investigation, I and another agent approached Tortora in

an effort to obtain his cooperation. Tortora has since entered a.

guilty plea pursuant to a cooperation agreement to charges of

conspiracy and securities fraud. Tortora has been cooperating

with the Government in the hope of receiving a reduced sentence.

Certain information Tortora. has provided has proven to be

reliable and has been corroborated by, among other things, the

statements of other cooperating witnesses, consensually recorded

conversations and court authorized interceptions of telephone

calls, telephone records, trading records, documents provided by

Tortora, and electronic communications and other documents

obtained from Hedge Fund A and Hedge Fund B.

24. At all times relevant to this Complaint, Adondakis

was an analyst at Hedge Fund B. During Adondakis's employment at


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Hedge Fund B, Adondakis obtained Inside Infox'mation fox the

benefit of Hedge Fund B. As part of this investigation, I and

another agent approached Adondakis in an effort to obtain his

cooperation. Adondakis has since entered a guilty plea pursuant

to a cooperation agreement to charges of conspiracy and

securiti.es fraud. Adondakis has been cooperating with the

Government in the hope of receiving a reduced sentence. Certaininformation Adondakis has provided has proven to be xeliable and

has been corroborated by, among other things, the statements of

other cooperating witnesses, consensually recoxded conversations

and court authorized interceptions of telephone calls, telephone

records, trading records, and electronic communications and other

documents obtained from Hedge Fund A and Hedge Fund B.

25. A t all ti mes rel evant to thi s Com pla int, Goyal was

an associate analyst for a global asset management fi.rm

headquartered in New York, New. York ("investment Fi.rm 1"). Prior

to woxking at Investment Firm 1, Goyal worked for Dell in an

office located in Round Rock, Texas. During Goyal's employmentat investment Fir m 1, Go yal obtai.ned Inside Inf ormat ion fro m

employees of Dell. As part of this investigation, I and another

agent appxoached Goyal in an effort to obtain his cooperation.

Goyal has since entered a guilty plea pursuant to a cooperation

agreement to chaxges of conspiracy and securities fxaud. Goyal

has been cooperating with the Government in the hope of xeceiving

a reduced sentence. Certain information Goyal has provided has

proven to be reliable and has been corroborated by, among other

things, the statements of other cooperating witnesses, telephone

records, trading records, documents provided by Goyal, and

electronic communications and other documents obtained fxom Hedge

Fund A.

Overview Of The In si der Tr'adin S ch em e

26. As set forth in more detail below, I have probable

cause to believe that fxom at least in or about 2008 thxough in

or about 200 9, JON HORV ATH and DANNY KUO , the de fe ndants, alo ng

with Tortora. and Adondakis, were friends who worked as analysts

at various investment firms and who exchanged with each other

Inside Information obtained directly or indi.x'ectly from employees

of publicly-traded technology companies.

27. For example, from in or about 2008 through in or

about 2009, Tox tor a pr ovided to JON HO RVATH and DA NNY KUO , the

defendants, and Adondakis Inside Information regarding Dell's

financial condition, includi.ng gross margin information (the

"Dell Inside Information" ). Tortora had obtained this Inside


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information from Goyal, wbo, in turn, obtained the information

from an employee at Dell (the "Dell Insider" ). A t times, tbe

Dell Insider worked in Dell's investor relations department. As

set forth in more detail below, tbe Dell Insider at times

provided initial information concerning Dell's financial

condition prior to tbe close of tbe quarter, and provided more

specific information about Dell's quarterly results after the

close of tbe quarter but prior to Dell's public announcement of

those results . G oya l in fo rmed Tor tora that tbe Del l Ins ide

Information came from an employee at Dell. At various times when

Goyal provided tbe Dell In side Info rmat ion to To rto ra, Tort ora

was l o c a t e d i n New Yo r k , Ne w Yo r k .

28. S i m il ar ly, JON HORV ATH and DANN Y KUO , tbe

defendants, obtained inside Information, directly or indirectly,

from employees at one or more publicly-traded technology

companies and provided that Inside Information to Tortora and

others. A t t i me s, HOR VATH and KUO in for med Tor tora and /or

Adondakis that tbe Inside Information originated with one or more

employees at tbe respective technology companies.

29. Tortora also passed the Dell Inside Information toTODD NEWMAN, tbe def endant, for whom To rt ora wo rked at He dge Fun d

A. T o r to ra inf ormed NEWNAN that the Del l Ins ide Inf orma tion came

from Goyal, and that Goyal bad obtained tbe information from a,

source at Del l. NEWMA N ca use d Hedg e Fund A to ex ec ute sec urit ies

transactions based, in whole or in. part, on the Dell Inside

Information in adv ance of De ll's first and sec ond qua rter 2008

earnings announcements, resulting in approximately $3.8 mi.llion

in illegal profits.

30. A d o nd aki s pas sed tbe Del l Ins ide Inf orma tion to

ANTHONY CHIAS SON, tbe def endant , among oth ers at Hedge Fund B.

Adondakis infor med CHI ASSON that the Dell ins ide Inf orma tion came

from a source at Dell. CHIASSON, along with others at Hedge Fund

B, caused Hedge Fund B to execute securities transactions based

in whole or in part on the Dell Inside Information in advance of

Dell's first and second quarter 2008 earnings announcements,

r esu l t i ng i n app r ox i m a t e ly $57 m i l l i on i n i l l ega l p r o f i t s .

31. A f te r re ce iving the Del l Ins ide Inf orma tion from

Tortora, JON HOR VATH, the defen dant, cau sed Hedge Fund C to

execute securities transactions based in whole or in part on tbe

Dell inside Information in advance of Dell's second quarter 2008

earnings announcements, resulting in approximately $1,000,000 in

illegal profits for Hedge Fund C.


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32. A f te r re ce iving the Dell Ins ide Inf orm ation. from

Tortora, DANNY KUO , the def endant , cau sed Inv estment Fir m D to

execute securities transactions based in whole or in part on. the

Dell Inside Information in advance of Dell's second quarter 2008

earnings announcements, avoiding losses of approximately $78,000.

Hed e Fund A Pa s Go al For The 1n side Infoxm ation

33. Based on my interviews with Tortora and Goyal, my

conversations with other FBI agents and my review of reports

prepared by other FBI agents, my review of business records,

including emails, of Hedge Fund A, and my review of bank records,

I have learned that Hedge Fund A paid Goyal for information,

including the Dell Inside Information, via a purported consulting

arrangement with another individual (" Individual 1").

Specifically, I have learned the following:

a. In or a b ou t lat e 20 07, Tor tora and Goy al

discussed the possibility of Goyal receiving payment for

information that he was providing to Hedge Fund A.

b. Fol lowing this conversation, Tortora arranged

with TODD NEWMAN , the de fe nd ant , to pay Ind ivi.dual 1 as a

"consultant" for Hedge Fund A. The payment arrangement was

accompli. shed through soft dollars.'

d. Bus iness records of Hedge Fund A show that,

between in or ab out Feb ruary 2008 and in or abou t Se pt ember 2008 ,

Hedge Fund A caused four payments to be made to Individual 1 each

in the amount of $18,750. Th e reference note for each of the

four payments indicated that the payments were for

"Research/Consulting services to [Hedge Fund A], including Market

Research, Industry and Company Analysis, and Network with

industry contacts for the Semiconductors and IT Hardware

industries." Bank records for a joint account held by Qoyal and

Individual 1 (" the Qoyal Joint Account" ) reflect four deposits

e ac h i n t h e amo u n t o f $ 1 8 , 7 5 0 i n 2 0 0 8 .

e. O n or a b ou t De cem ber 22, 20 08, Tort ora sent

an email to Individual 1 stating: "Just wanted to let you know

"Soft dollar" payments occur when an investment firm

causes its trading activity to be directed through a designated

broker -dealer, so tha t the commissions or fees from the executed

trading activity of the firm can then be used to pay for goods

and services consumed by the investment firm, such as payment for

the services of a research consultant utilized by the firm.

10


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you will receive a. bonus for 100k for your service pxovided

through 9/30/08." In fa ct, according to Tortora and Goyal, at

least some of the $100,000 payment constituted an advance payment

to Goyal for Goyal to continue to supply information, including

tbe Dell Ins ide In forma tion, to Hedge Fund A in. 2009.

f. Bu siness records of Hedge Fund A reflect thatHedge Fund A caused a soft dollar payment of approximately

$100,000 to In di vi.dual 1 on or ab out Jan uax'y 12, 2009, with tbe

same reference note as the four quarterly payments set forth in

subparagraph (d) above. Bank account recoxds fox the Goyal Joint

Account reflect a deposit of approximately $100,000 on or about

J a nu ar y 2 9 , 2 0 09 .

g. According to Goyal and Tortora, Individual 1

never provided and was never expected to provide research

serv ice s t o Hedg e Fu nd. A.

Hedge Fund A Made Approximately $1 Million In Illegal Pxofits

Based On The Dell In side Inf oxm atio n ln Adv ance Of

Dell's Ma 2 9 20 08 E a rn in s An no un cem ent

34. Fxom my conversations with Tortoxa and Goyal, my

conversations with other FB1 agents and my review of reports

prepared by other FBI agents, my review of electronic

communications and other business xecords obtained fxom Hedge

Fund A and Hedge Fund B, my review of documents provided by

Tortora. and Goyal, my review of various telephone records and

trading records of Hedge Fund A, and representations made by

Hedge Fund A, I have leaxned that Qoyal provi.ded the Dell Inside

Information to To rt ora. in advance of De ll 's May 29 , 20 08

quarterly earnings announcement and that Tortora passed the Dell

Inside Informa tion to TODD NEWN AN, tbe de fen dan t. M ore

specifically, I have learned tbe following:

a. In advance of Dell's May 29, 2008 quarterly

earnings announcement, tbe Dell Insider provided to Goyal, wbo,

in turn, provided to Tortora Inside Information indicating that

Dell's gross margi.n numbers for tbe quarter ended April 30, 2008

would be higher than market expectations.

b. Tel ephone records indicate that on or aboutMay 15, 2008, at approximately 9:41 p.m., Qoyal and tbe Dell

Insider spoke by telephone for approximately 16 minutes.

Immediately tbexeafter, Goyal made a call to Toxtora that lasted

a few seconds. Tortora returned Goyal's call at approximately

10:26 p.m., and that call lasted approximately 8 minutes.


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c. The n ex t mo rn ing , on or abo ut May 16, 20 08 ,

at approximately 7:41 a.m., Tortora sent an email to Qoyal titled

"dell," which stated: "Hey Sandy let me know if you have a.

couple of minutes just to run through tbe model before the open

today." Tortora sent another email to Goyal at approximately

7 :53 a . m . w i t h t b e su bj e c t l i n e " r e : De l l , " st at i n g : " He y s t r eet

at 33, I get 36-37, let me know if you agree." Qoyal respondedto Tortora by email at approximately 8:28 a.m., stating "I get

around 36 too." Based on my conversations with Tortora. and

Goyal, to arrive at the numbers in these emails, which

represented "earnings per share" or "EPS" numbers for Dell's

stock, both Tortora. and Qoyal ins erted the Dell I ns id e

Information relayed by tbe Dell 1nsider into their respective

financial models for Dell. Tbe EPS number that they each

c al cu l a t e d , i . e . 3 6 c en t s , wa s h i gh e r t han t he ex p e c t a t i o ns o fthe market or tbe "s tre et" .

d. A lso on or ab out May 16 , 20 08, at

approximately 8:57 a,.m. shortly after the exchange of emails

described in subparagraph (c) above telephone records reflect a

call between Tortora's cellular phone and Goyal's office line

that lasted approximately 6 minutes. Immediately thereafter, at

approximately 9:03 a..m., telephone records reflect that Tortora

called NEWMAN's cellular phone and that call lasted approximately

two minutes. Telephone records also reflect an approximately 4

minute call between Tortora and NE~ 's office line at

approximately 9:17 a.m.

e. Base d on my review of trading records for

Hedge Fund A, I have le ar ned tha t on or ab out May 16 , 20 08 ,

between approximately 9:35 a.m. and 3:22 p.m., a. portfolio at

Hedge Fund A ove r wh ich NEW MAN bad inv estm ent dis cre tion

purchased approximately 475,000 shares of Dell, at a total cost

of approximately $10 million.

35. Based on my review of publicly available

information, 1 have learned that Dell publicly announced its

c(uarterly earnings results after tbe close of the market (at 4:00

p.m.) on May 29, 2008.' Within one trading day of Dell's May 29,

2008 quarterly earnings announcement, Dell's stock price

increased by more than 5-. over tbe previous day's close.

Dell's fiscal year ends January 31. Thus, Dell's first

quarter includes earnings for the months of February, March, and

April


13/28

36. From my review of trading records for tbe

portfolio at Hed ge F und A ove r wh ich TODD NEWM AN, the def enda nt,

had investment discretion, I have learned tbe following:

a . Be t ween on o r abou t May 16 , 2 008 and. on o rabout May 29, 200S, NEW MAN executed or cause d to be exec ut ed, on

behalf of Hedge Fund A, a series of securities transactions thatresulted in the portfolio he managed holding a long position of

approximately 45 0, 000 sha res of Del l stoc k as of tbe close of the

market on or ab out May 29, 20 08 .

b. B etw e en on or abo ut May 29, 20 08, after tbe

close of the market, and on. or about June 3, 2008, Hedge Fund A

sold tbe 450, 000 share s it beld as of the cl ose of tbe ma xke t on

May 29 , 2008 .

c. Hedge Fund A realized an illegal profit of

approximately $1 million based on the sale of those 450,000

shares.

Hedge Fund A Ma de Approximately $2.8 Mi llion 1n

Illegal Pro fits Base d On The Dell I ns ide Infox mat ion

In Advance of De ll 's Au ust 28 200 8 Ea xn in s An no unc ement

37. Prom my convexsations with Tortora, Adondakis, and

Goyal, my conversations with other FBI agents and my review of

reports prepared by other FBI agents, and my review of electronic

communications and other business records obtained from Hedge

Fund A and Hedge Fund B, my review of documents provided by

Tortora., my review of various telephone records, my review oftrading records for Hedge Fund A, and xepresentations made by

Hedge Fund B, I ha ve le ar ned tha t, in advance of De ll 's Aug ust

28, 2008 quarterly earnings announcement, the Dell Inside

Infoxmation was passed from the Dell Insider to Goyal to Tortora

to TODD NEWMAN , the defe ndan t. M o r e sp ec if ica lly, I. have learned

tbe following:

a. Beg inning in or about July 2008, tbe Dell

Insider provided to Goyal initial information concerning Dell's

revenues and/or gross margin. Qoyal, in turn, provided this

information to Tortora. As the quarter progressed, Goyal

obtained and provided information indicating that Dell's grossmargin would be lower than market expectations.

b. Tel ephone records reflect that, on or about

July 2, 200S, at approximately 7:00 p.m., Goyal had a 31 minute

call with the Dell Insider. Tb e same evening, at approximately

10:43 p.m., Qoyal and Tortora spoke for 10 minutes. The next

morn ing, o n or abo ut Ju l y 3 , 2008, a t appr ox i ma te ly 8 :3 0 a .m. ,


14/28

telephone rec ords ref lect that Tor tora calle d NEWPVX a t He dg e

Fund A and that call lasted approximately 13 minutes.

c. Based on my review of trading records for

Hedge Fund A, I have learned that, beginning at approximately

9:31 a.m. on or ab out July 3 , 20 08, the port folio at Hed ge Fund A

over which NEWN M h ad i n v es tment con trol sold short 225 ,00 0

share s o f De l l . '

d. A fter the close of Dell's second quarter in

2008, but prior to Dell's public earnings announcement, the Dell

Insider provided to Qoyal, and Qoyal, in turn, provided to

Tortora, more specific information concerning Dell's margins that

confirmed that Dell's gross margin would be lower than market

expecta t i on s .

e . Thus , on o r abou t Augu s t 4 , 200 8 , a t

approximately 10:23 a.m., Tortora. wrote an email to Goyal with

the subject "dell," in which Tortora requested that Goyal "keep

[Tortora] posted" if he heard "anything new." Qoyal responded to

the email at approximately 10:24 a.m. stating that he "plan[ed]

to check today evening." The same day, at approximately 8:55

p.m., telephone records reflect that Goyal spoke with the Dell

Insider by telephone for approximately 40 minutes.

f. T he n ex t da y, on or ab out Aug ust 5, 20 08, at

approximately 8:32 a.m., telephone records reflect that Tortora

received a, call from a phone number that I know to be assigned to

Investment Firm 1 (where Qoyal worked), which lasted

approximately 9 minutes. At approximately 8:39 a.m. that same

day, Tortora sent an email to NE~ which included the Dell

Inside Information. Tortora had received from Qoyal. The email,

with the subject "dell," stated:

Del l checks-Q [quarter]' finished on fri, numbers still

coming in-rev [Dell's quarterly revenue number] could be

s l i gh t l y ab ov e 1 6 B [ $ 16 b i l l i on ] , s t r ee t

A s ho r t s a l e i s t he sa l e o f a, se c u r i t y t h a t an i n ve st o rdoes not own or a sale which is consummated by the delivery of a,security borrowed by the investor.

Included in brackets are my interpretations of the

words/phrases that precede the brackets in the email. The

interpretations are based on my experience and/or my

conversations with Tortora.


15/28

a t 1 5 . 9 [$15 . 9 b i l l i on ] , i mp l y i n g a 1' - . t o p l i nebeat-gm [gross margin] looking at 17.5-: vs street at

18.3., however could go higher as things get

r o l l e d u p-as of now, best guess 35c-36c [referring to

earnings per share] vs street at 36c-doesn't sound good, but still very prelim and

cou ld change-sounds like could be short after run and

DB preview that got expectations up

g. Fol lowing that email on or about August 5,

2008, Tortora. and NEWMAN cont inued to communi.cate by in stant

message ("IM") as follows:

(i) At approximately 8:40 a.m. (immediately

after receiving the email set forth above), NE~ sent an IM to

Tortora stating: "the Dell from sandy?"

(ii) Tortora responded at approximately 8:40

a.m.: "y on wi.th him him now." As set forth above, telephone

records reflect that Tor tora was on the tel eph one with I nve stment

Firm 1 (where Goyal worked) at the time of this IM communication.

(iii) At approximately 8:43 a.m., after

Tortora and Goyal ended their telephone conversation, Tortora

reported: "hey off now, so doesnt [sic] sound good, but still

need to monitor as always changes with rebates etc, but for now

its [sic] looking neg[,]" meaning that Dell's earnings would be

perceived negatively.

h. Bas ed on my review of trading records for

Hedge Fund A, I have le ar ned tha t on or ab out Au gu st 5, 20 08 ,

beginning at approximately 9:39 a.m., Hedge Fund A sold short an

addi t i on a l 1 8 0 , 0 00 s ha r e s o f De l l s t o ck . '

i . I n t h e d ay s b e f o r e t h e Au g u s t 2 8 , 2 0 0 8earnings announcement, Goyal had additional communications with

Tortora concerning Dell's financial condi.tion, including Dell's

gross margi.n, and confirmed that Dell's gross margin would be

By the end of the day on or about Jul y 24 , 20 08, NEWMAN

had closed out the short position he had previously started to

accumulate beginning on or about July 3, 2008, and did not hold

any position. in Dell between on or about July 25, 2008 and on or

abou t Augus t 5 , 2 00 8 .


16/28

lower than market expectations. Tortora passed this information

on t o NE WMAN.

j. According to Tortora, Goyal's information was

particularly significant to the direction of Dell's stock price

because market expectations were positive as to Dell prior to the

second quarter 2008 earnings announcement.

38. From my review of publicly available information,

I have learned that Dell publicly announced its second quarter

earnings results (for the months of May, June, and July) after

t h e c l o s e o f t h e ma r k e t ( a t 4 : 0 0 p . m . ) o n A u g u s t 2 8 , 2 0 0 8 .

Within one trading day of Dell's second c(uarter earnings

announcement, Dell's stock price fell by approximately 13-: over

t he p r e v i o u s d ay ' s c l os e .

39. Based on my review of trading records for the

portfolio at Hed ge Fund A over whi ch TODD NEWMA N, the de fen dant ,

had investment discretion, I have learned the following:

a.. B et w ee n on or about July 3, 2008 , and the

close of the ma rket on or ab out Au gus t 28, 20 08, NEW MAN execute d

or caused to be executed, on behalf of Hedge Fund A, a series of

securities transactions that resulted in the portfolio he managed

holding a short position of approximately 700,000 shares of Dell

as of the close of the ma rke t on or ab out August 2 8, 200 8.

b . Be t ween on o r ab out Augu s t 29 , 2 008 and on o r

about September 4, 20 08, Hedge Fund A co ve red its ent ire short

position in Dell stock.

c. Add itionally, Hedge Fund A purchased put

opti.on contracts' in Dell between. on or about August 15, 2008 and

on. or about August 28, 2008, which Hedge Fund A sold on or about

Augus t 2 9 , 2 008 .

d. Hedge Fund A realized an. illegal profit of

approximately $2.8 million based on the securities transactions

described in this paragraph.

A put option. contract gi.ves the holder the of the

contract the right to sell a specified number of shares at a

speci. fied pri.ce by a certain date, known as the exercise date.


17/28

Hedge Fund B Made Over g4 Million in Illegal Pxofits

Based On The Dell In side infor mation In Ad va nce Of

Dell's Ma 2 9 2 008 E a rn in s Ann oun cem ent

40. From my conversations with Tortora and Adondakis,

my conversations with other FBI agents and. my xeview of reports

prepared by other FBI agents, my review of electroniccommuni.cations and other business records obtained from Hedge

Fund A and Hedge Fund B, my review of telephone records, and my

review of trading records for Hedge Fund B, I have learned that,

in advance of Dell's May 29, 2008 quarterly earnings

announcement, Adondakis passed tbe Dell Inside Information to

ANTHONY CHIASSON, tbe defe ndant . M o re sp ec ific ally, I have

learned the following'.

a.. According to Adondakis, in advance of Dell's

May 29, 2008 quarterly earnings announcement, Tortora provided to

Adondakis information indicating that Dell's overall margin

numbers for tbe first quarter would be higher than market

expectati.ons. Adondakis passed the Dell Inside Infoxmation to

CHIASSON and Hedge Fund B executed securities transactions based

in part on that Inside Infoxmation.

b. Tel ephone records reflect that on or about

May 11, 2008, at app rox imat ely 8:57 p.m., the Dell Ins ider and

Goyal spoke by telephone fox appxoximately 32 minutes, and that,

latex that same night, at approximately 9:44 p.m., Goyal spoke to

Tortora by telephone for approximately 24 minutes. The next

morning, on or about May 12, 2008 at approximately 8:46 a.m.,

Toxtora sent an email to Adondakis with the subject "dell/amd",

which stated: "hey, lets fsicj catch up on dell and amd pxe-open

if free." Th e same day, at approximately 8:54 a.m. and at

approximately 9:41 a.m., telephone records reflect that Adondaki.s

bad two calls with Tortoxa. that lasted 14 and 8 minutes

respectively. At approximately 11:44 a.m. on or about May 12,

2008, telephone records reflect that Adondakis called CHIASSON's

office line at Hedge Fund B and that call lasted approximately 13

minutes .

c. Based on my review of trading records of

Hedge Fund B, I have leaxned that: (1) on or about May 12, 2008,

at appxoximately 3:41 p.m., Hedge Fund B purchased 3,500 Dell

call option contracts'; and (2) on ox about May 13, 2008, Hedge

Fund B puxch ased 175 ,000 shares of Dell sto ck .

A call option contract gi.ves tbe holder of tbe contract

the right to buy a certain number of shares at a. specified price

by a c e r t a i n da t e .


18/28

d.. Similarly, after tbe series of telephone

calls and emails between Goyal and Tortora. on. or about Nay 15,

2008 and May 16 , 20 08 tha t are set forth in pa ra graph 34 abov e,

on ox' about May 16, 2008, at approximately 9:05 a.m., telephone

records reflect that Tortora called Adondakis at Hedge Fund B, in

a call that lasted approximately 9 minutes.

e. Based on my review of trading records ofHedge Fund B, I ha ve le ar ned tha t on or a bout Nay 16 , 20 08, at

approximately 9:29 .a.m., Hedge Fund. B purchased an additional

7 5 0, 00 0 s h a r e s o f De l l s t o c k .

41. Based on my review of trading. records of HedgeFund B, I have le ar ned tbe fol low ing :

a.. Bet ween on or ab ou t May 13 , 2 008 and on or

about May 28, 200 8, Hedge Fund B purc hased app rox ima tely 1.7

million shares of Dell stock. Hedge Fund B sold these shares

between on or about May 29, 2008, after the quar'terly earningsann ou n ce m en t , a n d o n o r a b o u t J u n e 2 , 2 0 0 8 .

b . On o r abou t Jun e 2 , 2008 , Hedge Fund B so l d

the 3,500 Dell call option contracts that it bad. puxchased on or

abou t May 12 , 2 0 08 .

c. Hedge Fund B realized an illegal profit of

over $4 million based on tbe securities transactions described

above.

Hedge Fund B Ma de Ov er $5 0 Mi ll i. on In Illegal Pro fi ts

Based On The De ll Ins ide Infor mat ion In Ad va nce Of

Dell's Au ust 28 20 08 Ea xni n s An no unc eme nt

42. From my conversations with Tortora and Adondakis,

my conversations with other FBI agents and my review of reports

prepared by other FBI agents, and my review of electronic

communications and other business and trading records obtained

from Hedge Fund A and Hedge Fund B, my review of various

telephone recox'ds, and repr ese ntations of He dge F und B, I ha ve

learned that, in ad van ce of De ll's August 28, 200 8 qua rte rly

earnings announcement, Adondakis passed the Dell Inside

Information to AN THON Y CHIA SSON , the def enda nt, among ot hers at

Hedge Fund B. Speci.fically, I have leaxned that:

a. Acc ording to Adondakis, Tortora provided

Adondakis tbe Dell Inside Information in advance of the Dell

second quarter earnings announcement. Speci.fically, Tortora told

Adondakis that Dell's gross margin for the second quarter would

be lower than market expectations. Adondakis provided this


19/28

information to CHI ASS ON, infor ming bim tha t the info rma tion came

from a. source at Dell.

b . On or about J u l y 3 , 2008 , a t appr ox i ma te ly8:46 a.m., three minutes after Tortora. ended his conversation

with TODD NE~ , the def endant, see supra at $ 37(b), Tortora

sent an email to Adondakis stating that he bad "updates on delland semicap." Tb e next day, at approximately 5:46 p.m. and at

approximately 5:55 p.m., telephone records reflect that Tortora

bad two calls with Adondakis that lasted approximately 4 minutes

in total. Tortora bad another call with Adondakis on or about

July 7, 2008 at approximately 2:27 p.m. that lasted approximately

16 minutes, and a further call on July 8, 2008 at approximately

9:12 a.m. that lasted approximately six minutes.

c. Bas ed on my review of trading records for

Hedge Fund B, I ha ve lear ned that, on or. about July 8, 2008 at

approximately 9:33 a.m., Hedge Fund B sold short approximately

1 .4 5 m i l l i on s ha r e s of Del l s t o ck .

d. On o r a b ou t Au gus t 5, 20 08, at app roxi mately

8:41 a.m., Tortora forwarded to Adondakis (as well as to JON

HORVATH and DANNY KU O, the def endan ts) tbe email be bad sent to

TODD NE~ , tbe defendant, with the subject "dell" that

contained the information pertaining to Dell's gross margin. See

supra $ 37(f). Adondakis provided the information about Dell's

gross margins to CHIASSON and one or more other individuals atHedge Fund B. CH IA SSO N and. another individual at He dge Fund B '

(" Individual 2") instructed Adondakis to analyze tbe effect on

Dell's stock price based on the Dell Inside information Adondakis

b a d r e c e i v e d .

e. The reafter, Adondakis prepared tbe analysis

and, on or about Au gust 8, 20 08, met wit h CHI ASSON and Ind ivi dual

2 i n CHI A SSON' s o f f i c e t o d i s c u s s i t .

f. Bas ed on my review of trading records for

Hedge Fund B, on or abo ut Au gus t 11, 20 08, at approximately 10 :29

a.m., Hedge Fund B so ld sh ort an add itional 10 0, 000 sha res of

Dell stock, and purchased 5000 put option contracts in Dell, withexpiration dates of Se pt ember 25, 2008, a. date that was af ter

Dell's expected public earnings announcement.

g. Subs equently, CHIASSON additionally

instructed Adondakis to write up an .investment thesis for Dell

which supported the theory that gross margins would be "light,".

but which omitted the fact that tbe information came from a

contact at Dell. Adondakis prepared this analysis and sent it by

19


20/28

email on or about August 15, 2008 at approximately 1:43 p.m. to

an email group at He dge Fund B tha t inc luded CHI ASS ON .

h. On or ab ou t Mo nd ay, Augus t 18 , 20 08, at

approximately 8:43 a.m., Tortora sent an email to Adondakis

stating: "Call me, I have an update for you today," referring to

an update with respect to the Dell Inside Information. Atapproximately 9:13 a.m., on or about August 18, 2008, telephone

records reflect that Tortora. and Adondakis spoke by telephone for

approximately 18 minutes. At the time, Adondakis was in

Cali.fornia attending a co nf erence with CHIASSON and In di vidual 2.

Adondakis met with C HIA SSON and Indiv idual 2 sh ort ly af ter his

call w3.th Tor tor a.

i. O n or ab ou t Au gus t 18, 20 08, beg inn ing at

approximately 3:29 p.m., CHIASSON exchanged a series of emailswith a. trader at Hedge Fun d B . ln th os e em ai ls, CHIASSO N

discussed the status of Hedge Fund B's short position in Dell and

instructed tbe trader to increase the short position in Dell.

j. Bas ed on my review of trading records for

Hedge Fund B, I have le ar ned tha t on or ab out Au gust 18 , 20 08

Hedge Fund B so ld short an add iti.onal 700,000 shares of De ll

stock.

k. On or ab ou t Au gus t 18, 20 08, CHIA SSON

exchanged a. series of emails regarding Dell with an individual

wbo worked at another investment firm (" Individual 3"). At

approximately 6:34 p.m., CHIASSON wrote to Individual 3: "Gm17.4-17.7." In d ivid ual 3 re sp onded : "But that's nearl y a. 1-' gm%

miss." ln a. subsequent email later that same evening, CHIASSON,

stated, among other things, that: "Ny call starts with gm."

l. On or ab ou t Au gus t 19, 20 08, CHI ASSO N,

Individual 2, and a trader at Hedge Fund B exchanged emails in

which they discussed i.ncreasing Hedge Fund. B's short position in

Dell and acquiring additional put option contracts in Dell.

m. Bas ed on my review of trading records for

Hedge Fund B, I have le ar ned tha t on or ab out Au gust 19 , 20 08

Hedge Fund B sold short an ad di tio nal 1, 150,000 sha res of De ll

stock and ace(uired an additional 5,900 put option contracts in

Del l .

On or about Augu st 27, 200 8, Ado nda kis

provided a further update on tbe Dell Inside Information to

CHIASSON, Indivi dual 2 and an ot her ind ivi dual at He dge Fund B

(" Individual 4") . Adondakis sent an email at approximately 12:49

p.m. to CHIASSON, Individual 2, and Individual 4 indi. cating that

20


21/28

Adondakis had an update on Dell. Subsequent emails betweenAdondakis, CHIASS ON, Individual 2, and In di. vidual 4 con firme d

they were available for a telephone call shortly after

Adondakis's email.

o. Ac cording to Adondakis, that same day,

shortly after these emails were sent, Adondakis participated in atelephone call with CHI ASS ON, Indiv idual 2, and Ind ivi dual 4.

During tbe telephone call, Adondakis discussed the gross margin

information that Adondakis bad received from Tortora and the

market expectations as to Dell's gross margins.

p. Te l ephone records reflect a call on or about

August 27, 2008, at approximately 12:56 p.m., between Adondakis

and a telephone number assigned to Hedge Fund B that lasted

approximately 40 minutes.

q. At approximately 1:33 p.m. on or about August

27, 2008, Indivi dual 4 sent an IM to va ri ous trad ers at Hedg e

Fund B stati ng: "sbr t 250 del l" .

r. Based on my review of trading records forHedge Fund B, I ha ve le ar ned that on or a bout Au gust 27, 2008, at

approximately 1:34 p.m., Hedge Fund B placed. an order to sell

short an add iti onal 25 0, 000 shares of Del l sto ck .

43. From my review of trading records for Hedge Fund

B, I have lear ned that :

a . Be t ween on o r abou t Ju l y 8 , 2 008 , and on o r

about August 28 , 2008, Hedge Fund B accumul ate d a net sho rt

position in Dell stock of approximately 8.6 million shares.

Between on or about August 29, 2008 (the day after Dell's public

earnings announcement) and on or about September 16, 2008, Hedge

Fund B covered its entire short position in Dell.

b . Be t ween on o r abou t Augu s t 11 , 2 008 an d on o r

about August 26, 20 08, Hedge Fund B pu rc ha sed put opt ion

contracts in De ll , which Hedge Fund B sol d be tw een on or ab ou t

August 29, 2008 and on or ab out September 16, 20 08 .

c. Hedge Fund B realized an illegal profit of

approximately $53 million based on tbe securities transactions

desc r i bed above .


22/28

Hedge Fund. C Made Appr oximately $1,0 00,000 I'n Illegal Profits

Based On The De ll Inside Informat ion In Adv ance Of

Dell's Au ust 28 2 008 Ea rn in s An nou nce men t

44. From my conver'sations with Tortora, my


prepared by other PBI agents, my review of electroniccommunications records obtained from Hedge Fund A and. Hedge Fund

B, and provided by Hedge Fund C, my review of trading records for

Hedge Fund C, and my review of various telephone records, I have

learned that Tortora. provided tbe Dell Inside Information to JON

HORVATH, tbe de fe nd ant, in co nn ection. wi.tb Dell's Augus t 28, 20 08

quarterly earnings announcement. Specifically, I have learned

t h a t :

a . . On mu l t i p l e oc ca s i o n s i n 2 0 08 a n d 2 0 0 9 ,Tortora provided tbe Dell Ins ide Info rmation to HORV AT H.

b. Tel ephone records reflect a call on or about

July 3, 2008, at appr oxima tely 9:5 6 a. m., bet ween To rt ora. and

HORVATH's work telephone number that lasted approximately one

minute and another call at approximately 9:57 a.m. between

Tortora and. HORVATH's cel lular tel ephone that also la sted

approximately one minute.

c. On or ab out July 24, 2008, at approximately3:35 p.m., Tortora. sent an emai l to HORVATH and DANN Y KUO , the

defendants, and Adondakis, with tbe subject line: "PW: dell."'

Tbe email stated:

Del l checks:same messager ev f i n eo pex f i n egm could be an issue, will know more

in 2 we ek s

d. Te l ephone records reflect that on or about

July 24, 2008, between app rox imately 4:58 p.m . and 5 :01 p. m. ,

Tortora and HORVATH exchanged a series of text messages using

their cellular telephones.

On or about July 24, 2008, at approximately 1:23 a.m.,

telephone records reflect a call between Goyal and the Dell

Insider that lasted approximately 35 minutes. Additionally, at

approximately 3:15 p.m. that same day, telephone records reflect

a call between Tortora and Investment Firm 1 (where Goyal worked)

that lasted approximately four minutes.


23/28

e . A s n o t e d ab ov e , o n o r a b ou t A u g u s t 5 , 2 0 0 8 ,at approximately 8:41 a.m., Tortora. sent an email containing tbe

Dell Inside Information to HORVATH. See supra $ 37(f).

f. Tel ephone records reflect a call between

Tortora and HORVA TH on or ab out Aug ust 6, 20 08 , at appr oxima tely

10:32 a.m., which lasted for approximately 6 minutes.

g. On or about August 18, 2008, at approximately

12:20 p.m., telephone records reflect a call between Tortora and

HORVATH that las ted app rox imately 10 min ute s. M inu te s la ter , at

approximately 12:34 p.m., telephone records reflect that HORVATHcalled the port folio manager at Hedge Fun d C f or wh om HO RVATH

worked (" Portfolio Manager 1") and they spoke for approximately 1

minute.

b. Bas ed on my review of trading records for

H edge Fun d C , I have learned that on or ab out Au gust 18 , 20 08, atapproximately 12:37 p.m., the portfolio over which Portfolio

Manager 1 had investment authority started to sell short shareso f D el l .

i. On or about August 25, 2008, at approximately

12:57 p.m. , Tor tora sen t an emai l to HORVATH, KUO, and. Adondakis

stating, in relevant part: "did new apple and dell checks today

and both sound bad, same as before, so no change to thinking.

Nell [si.c] catch up later." Shortly thereafter, at approximately

1:15 p.m., HORV ATH sen t an em ail to Po rt fo lio Mana ger 1 and

anothe r i n d i v i dua l , wi t h t b e sub j e ct l i n e " [Del l 1 ] s hor t I Rconvo." In t ha t em ai l, HORV ATH repo rted , in re lev ant par t, that

he bad bad a. "[v] ery short" call with Dell's Investor Relations

department, that he "would describe the tone as cranky with IR

saying didn't want to talk as it was is [si.c] too close to EPS

but I don't recall this being an issue before when I am only

asking them to go over housekeeping items (like what they've said

about restructuring progress etc)." In tbe same email, HORVATH

also noted that "JT also spoke with them again and his check was

unchanged."

j. Lat er tbe same day, at approximately 2:21p.m., HORVATH sent ano ther emai l to Por tfo lio Man ager 1 in whi ch

b e s t a t e d :

[T] be data is second hand but this contact was

correct in tbe last two quarters. JT did

d i f f ' t c h ec k s 7 / 3 , 7/ 24 , an d 8/ 5 a l l t h e wh i . l e

tbe message was revs small upside, opex in-line

but GMs under pressure but said be wasn't sure

magnitude until the final roll up. Then final

23


24/28

read came thru on 8/18 and was 50-80 bps GMs

miss, revs small upside, and opex in line

netting out to EPS miss. I think investors

understand that GM will be down slightly q/q

and could. even miss consensus GM but I don' t

think they are expecting a big miss on GM. Not

a good set up to be long as I think DELLprobably has to show $0.02 upside for the stock

to go up after all these positive reviews.

k. On or ab out August 27, 2008, at approximately1:07 p.m., HORVATH sen t an em ail to Po rt folio Ma nager 1 and

another indivi.dual at Hedge Fund C with the subject "[DELL - 1]

EPS preview." The email stated: "I think we have roughly $6M

exposure here right now and I think we should increase it $1 2M

and possibly more if it [meaning Dell' s stock] rallies further

into the print." The emai.l further contained numbers for Dell's

earnings, including a. gross margin number of "17.7-. . Vs

s t r e e t . . . w i t h GM 1 8 . 3 ' - . . "

1. Th e sam e da y, on or ab out Au gus t 27, 200 8, at

approximately 1:11 p.m., Portfolio Manager 1 sent an email toHORVATH with the su bj ect line , "Dell acti on, " whi.ch stated: "Very

remiscient [sic] of last qtr, up everyday into the print. Were

[sic] near $10mln. Hav e u double checked JT this week?" H ORVATH

responded at approximately 1:15 p.m., stating: "Yes he checked in

a couple of days ago , sa me r ea d n o chan ge . "

45. Based on my review of trading records for Hedge

Fund C, I have learned the following:

a. . Be t ween on o r ab ou t Au gu s t 1 8 , 20 08 an d on o r

about August 28, 2008, the portfolio over which Portfolio Manager

1 had investment authority accumulated a net short position in

Dell stock as of 4:0 0 p.m. on or a bout Au gust 28, 20 08 of ove r

1 5 0, 0 0 0 s h a r e s . B e t w ee n o n o r a b o u t A u g u s t 2 9 , 2 0 0 8

and on or about Se pt ember 2, 20 08, Hedge Fun d C co ve red it s

entire short position in Dell.

b . Be t ween on o r ab ou t Au gu s t 1 9 , 20 08 an d on o rabout September 2, 2008, the portfolio over which Portfolio

Manager 1 had investment authori.ty aequi.red and subsequently

liquidated put option contracts in Dell.

c. Hed ge Fund C realized a profit of

appro xi m at e l y $1 , 000 , 0 0 0 b a s e d o n t h e s ecu r i t i e s t r an s ac t i on sdesc r i bed above .


25/28

Investment Fi.rm D Avoided Los ses of App roxima tel y $7 8, 000

Based On The De ll Ins ide Information In Ad va nce Of

Dell's Au ust 28 2008 Ea rni n s An no unc eme nt

46. From my conversations with Tortora., my


prepared by other FBI agents, my review of electroni.ccommunications records obtained from Hedge Fund A and Hedge Fund

B, and a review of electronic communications and other documents

provided by Investment Fi.rm D, my review of trading records for

Investment Firm D, and my review of various telephone records and

trading records, I have learned that Tortora provided the Dell

Inside Informat ion to DA NNY KUO, tbe de fen dant, i.n connection

with Dell's August 28, 2008 quarterly earnings announcement.

Specifically, I have learned that:.

a . On mu l t i p l e o c c a s i o n s i n 2 0 0 8 a nd 2 0 0 9 ,Tortora provided the De ll Insid e Info rmation to KUO .

b. On or ab ou t Jul y 3, 20 08, at app rox imat ely

11:50 a.m., after tbe series of calls described in paragraph

37(b) above, telephone records reflect a call between. Tortora. andKUO's work telephone number that lasted approximately 5 minutes.

c. Bas ed. on my review of trading records for

Investment Firm D, I have learned that tbe portfolio over which

tbe portfolio manager to whom KUO reported (" Portfolio Manager

2") bad investment discretion bad a long position of

approx imate l y 37 , 7 0 0 sh a r e s of Del l as of Jul y 7, 20 08 . On orabout July 8, 2008 and on or about July 9, 20 08 , tbe port folio

over which Portfolio Manager 2 had investment discretion sold

1,000 and 3,500 shares of Dell respectively.

d . A s n o t e d ab ov e , on o r ab o u t Au g u s t 5 , 2 0 0 8 ,at approximately 8:41 a.m., Tortora. sent an email containing the

Dell Inside Information to KUO. See supra $ 37 (f) .

e. Teleph one records reflect a series of short

calls on or about August 18, 2008, beginning at approximately

12:07 p.m., betw een To rt ora.'s cellular teleph one and KUO's

cellular telephone and work telephone.

f. Ba s ed. on my review of trading records for

Investment Firm D, I have learned that on or about August 18,

2008, at approximately 12:33 p.m., tbe portfolio over which

Portfolio Manager 2 had investment discretion sold an additional

9 , 30 0 s h ar e s o f De l l .


26/28

g. On or about August 19, 2008, at approximately

10:15 p.m., after a series of emails discussing positive news for

another stock, KUO sent an email to Tortora stating in relevant

part: "do you think Dell will be fine as well then'P checks are

okay." Tortora responded by email at approximately 10:32 p.m.:

"No I told you yesterday about dell, call me tomorrow if you

fo rgo ' t " .

47. Based on my review of trading records for

Investment Firm D, I have learned the following:

a . Be t ween o n o r ab ou t Ju l y 8 , 2 008 and on o rabout August 28, 2008 , the por tfo lio over which Por tfo lio Nana ger

2 had investment authority sold approximately 28,495 shares of

Dell stock, avoiding losses of approximately $78,000.

KUO Pzovides Nvi dia ins ide Info rmation To The Cir cle of Anal s ts

48. Prom my conversations with Tortora and Adondakis,

my conversations with other FBI agents and my review of reports

prepared by other FB1 agents, my review of emails obtained from

Hedge Fund A and Hedge Fund B, my review of emails provided by

Hedge Fund C, In ve stm ent Firm D and To rt ora , I have le arned tha t

the following:

a.. As noted above, from at least in or about2008 through in or ab out 20 09, JON HORVA TH, DANNY KUO, the

defendants, Tortora and Adondakis exchanged Inside Information

concerning various publicly traded technology companies, whichthey each obtained directly or indirectly from sources at those

companies. This circle of friends exchanged the Inside

Information for the purpose of executing profitable securities' t ransac ' t ions .

b. Amo ng other information KUO shared within

this circle of friends, KUO provided Inside Information

concerning Nvi dia to To rto ra, Adon daki.s and HORVATH . A cco rd ing

to Tortora and Ad ond ak is, KUO info rmed them tha t the Nv idi a.

information came, directly or indirectly, from an insider at

Nv id ia .

c. Fo r example, on or about February 9, 2009 at

approximately 8:05 a.m., the day before Nvidia's public earnings

announcement, KUO sent an email to Portfolio Nanager 2 that

contained Inside Information concerning Nvidia. KUO immediately

forwarded this email to Tortora, Adondakis and HORVATH.

Specifically, that email stated:


27/28

Check with an accounting manager at NVDA through a

friend of mine

Jan quar te r r evenu es a t $48 1N, d own 46 .4 - . qo qConsensus at $489M, down 45'; qoq [quarter over quarterj

NVDA preannounced the quarter and guided for revenues

t o d e c l i n e 4 0 - 5 0 -: q oqMy friend forgot to ask for GM [gross margin] but says

will call this guy again. today

No read on. gu i da nce

d . T h e n e x t d a y , on o r ab o u t F e br u a r y 1 0 , 2 0 0 9at approximately 12:26 p.m., KUO sent another email to Tortora,

Adondakis, and HOR VATH , whi ch stat ed, in rel evant pa rt: "NVDA Jan

Q GAAP GM will be 29 .4 %. "

e. S im i lar ly , on or abou t May 4, 20 09 at

approximately 9:50 a.m., KUO sent an email to Portfolio Manager

2, which KUO als o for war ded to Tor tora , Adon daki s and HORV ATH

stating, among other things:

NVDA check s ove r the we ekend , after the cl ose of

quar ter

April quarter revenues around $668 million

Came in better than the last read (mid April) due to

strong pickup in demand and unit shipment in the last

week of A pr i lApril quarter revenues were in line with ear'lier read

of $650-680M at the end of Na rc h

April qua rte r GM 30-:

f. Fu rth er , on or ab out Aug ust 6, 200 9 at

approximately 9:56 a.m., KUO sent an email to Portfolio Manager

2, which KUO als o forw arde d to To rto ra, Adon daki s and HORVA TH ,

stating, among other things:

NVDA checks fi nal rea d befor e the pr in t

Initial projections for July quarter was $750M and 33.5

34.5% GN and they cam e in a li tt le be tter on a. strongfinish to the quarter

J ul y q u a r t e r r ev e n u e s $ 7 7 7 NGAAP GM in th e 20'. range.

49. Based on my review of publicly available

information, I have learned the following:

27


28/28

a. Nv i dia. publicly announced its quarterly

earnings results for the fourth quarter of fiscal year 2009 after

the close of the market (at 4:00 p.m.) on February 10, 2009.' In

that earnings announcement, Nvidia reported. fourth. quarter

revenues of $481.1 million and GAAP gross margins of 29.4

percent .

b. Nvi dia publicly announced its quarterly

earnings for the first quarter of fiscal year 2010 after the

c lose o f t he mar ke t (a t 4 :0 0 p .m . ) on Ma y 7 , 2009 . I n t ha tearnings announcement, Nvidia reported second quarter revenues of

$664.2 million and Non-GAAP gross margins of 30.6 percent.

c. Nv idia publicly announced its quarterly

earnings for the second quarter of fiscal year 2010 after the

c lose of the ma rke t (at 4: 00 p.m .) on Aug ust 6, 20 09 . In t h a t

earnings announcement, Nvidia reported second quarter revenues of

$776.5 million and GAAP gross margins of 20.2 percent.

WHEREFORE, depo nent pray s that arr est wa rr ants be

issued for the above-named defendants and at t hey be impri'soned

or bailed as the case may be.

DA MAKOLS ECIAL A GE NT

FEDERAL BUREAU OF IN VE ST IGA TION

Sworn to before me this

1 7TH ' day o f J anu a r y 201 2

0 LE 'G BR IE L W . ORENS TE IN

UNITED STATES MAG IST RATE JUD GE

SOUTHERN DIS TRICT OF NEW YO RK

Nvidia's fiscal year ends January 31. Thus, Nvidia's

fourth quarter includes earnings for the months of November,

December, an d J an u a r y .

28

us v newman chiasson horvath kuo the ‘bosses’

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