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United States v. Ying

United States District Court, N.D. Georgia, Atlanta Division

December 4, 2018

JUN YING, Defendant.



         Defendant Jun Ying, who is charged with two counts of insider trading, asks the Court to dismiss the Indictment in his case. Magistrate Judge Russell Vineyard's Final Report and Recommendation [Doc. 59] recommends the denial of Defendant's Motion to Dismiss the Indictment [Doc. 35-1]. Defendant objects to the Magistrate Judge's findings that: (1) the Indictment properly alleges the essential elements of insider trading; and (2) the Indictment is not multiplicitous [Doc. 61].

         A district judge has broad discretion to accept, reject, or modify a magistrate judge's proposed findings and recommendations. United States v. Raddatz, 447 U.S. 667, 680 (1980). Pursuant to 28 U.S.C. § 636(b)(1), the Court reviews any portion of the R&R that is the subject of a proper objection on a de novo basis and any non-objected portion on a “clearly erroneous” standard. Accordingly, the Court has reviewed the Defendant's motion de novo as Defendant's objections go to the essence of the Magistrate Judge's evidentiary and legal analysis.

         I. Abbreviated Factual Background[1]

         Defendant Jun Ying is charged with two counts of securities fraud and insider trading, in violation of: 18 U.S.C. § 1348, 15 U.S.C. §§ 78j(b) and 78ff; and 17 C.F.R. §§ 240.10b-5 and 240.10b5-1. (Doc. 1, Indictment).

         Defendant was formerly an employee of Equifax Inc. and served as the company's Chief Information Officer for the U.S. information Solutions business unit. (Id. ¶ 3.) While Defendant was employed in this capacity, Equifax's databases were hacked from mid-May 2017 until July 2017. (Id. ¶ 6.) Equifax discovered this data breach on July 29, 2017 and responded, in part, by changing the administrative credentials for many of its internal databases. (Id. ¶¶ 7-9.) Through his employment, Defendant was made aware of these internal database changes. (Id.) On August 25, 2017, Defendant and other employees reporting to him were asked to assist in responding to a breach situation involving a potential Equifax customer, though they were actually assisting in the response to a breach of Equifax's entire system. (Id. ¶ 12.) That same day, Defendant sent a text message that read: “Sounds bad. We may be the one breached” and “I'm starting to put 2 and 2 together.” (Id. ¶ 13.)

         Three days later, on August 28, 2017, Defendant allegedly conducted internet searches regarding the prices of stock of the company Experian after that company had experienced a data breach in 2015. (Id. ¶ 14.) Less than an hour after conducting these searches, Defendant exercised all of his available stock options for Equifax securities, thereby receiving 6, 815 shares of Equifax stock. (Id. ¶ 15-16.) Defendant then sold the 6, 815 shares for a profit of over $480, 000. (Id.) The following day, Defendant sent another text message (to a different individual) that said: “I think some big media announcement is coming about us, ” and “I think it might be bad.” (Id. ¶ 17.) Nine days later, on September 7, 2017, Equifax publicly disclosed the data breach, and the following day, Equifax's stock dropped in price. (Id. ¶ 18.)

         II. Defendant's Objections

         a. Sufficiency of the allegations in the Indictment

         Defendant has filed a motion to dismiss the Indictment, arguing that the Indictment fails to allege the essential elements of the charged offenses, specifically, that Mr. Ying knowingly possessed material nonpublic information and that Mr. Ying used such information when he traded. (Motion to Dismiss, Doc. 35 at 1.) The Magistrate Judge determined that the Indictment sufficiently indicates the material nonpublic information the Defendant allegedly possessed (the data breach itself), when he possessed it, and that he traded on the basis of that information. (R&R, Doc. 59 at 14-16.) In addition, the Magistrate Judge concluded that the Indictment was not flawed for failing to use the word “used” because “linguistic precision is not required in an indictment, ” and an indictment's “allegations are sufficient if they include all elements of the offense and briefly describe the facts of the commission of the offense.” (R&R at 17) (quoting United States v. deVegter, 198 F.3d 1324, 1330 (11th Cir. 1999).) The Court takes Defendant's specific objections in turn.

         i. Identification of material nonpublic information

         Defendant first argues in his objections that the Magistrate Judge “erroneously found that the indictment identifies the material nonpublic information at issue.” (Def. Obj. at 5-9.) In particular, Defendant contends that the Magistrate Judge (1) misread paragraph 19 of the Indictment and (2) misapplied that paragraph to both counts of the Indictment.

         Paragraph 19 of the Indictment concerns “Defendant's Scheme to Defraud” and alleges that:

19. In violation of his obligations under the Insider Trading Policy and of the fiduciary and other duties of trust and confidence that JUN YING owed to Equifax and its shareholders, on or about August 28, 2017 JUN YING traded in Equifax securities on the basis of material nonpublic information related to the data breach, and thereby earned illegal profits and illegally avoided losses.

(Indictment ¶ 19.) Defendant argues that this paragraph does not state that the material nonpublic information is the Equifax data breach. (Def. Obj. at 6.) Defendant's argument, which relies on a highly technical interpretation of a single paragraph in the Indictment, both misconstrues the standard for a sufficient indictment and ignores the context of the remaining paragraphs in the Indictment.

         “In determining whether an indictment is sufficient, we read it as a whole and give it a common sense construction.” United States v. Jordan, 582 F.3d 1239, 1245 (11th Cir. 2009). Further, “the indictment's validity is to be determined by practical, not technical, considerations.” Id. (internal citations omitted). An indictment is sufficient as long as it: (1) presents the essential elements of the charged offense; (2) notifies the accused of the charges to be defended against; and (3) enables the accused to rely upon a judgment under the indictment as a bar against double jeopardy for any subsequent prosecution of the same offense. Id. (citing United States v. Woodruff, 296 F.3d 1041, 1046 (11th Cir. 2002)).

         Based on a “common sense construction” and “practical [] considerations, ” the Indictment here, “read as a whole, ” clearly gives Defendant fair notice of the nature of the material nonpublic information involved in the charged offense, sufficient to enable him to prepare a defense. The material nonpublic information Defendant is alleged to have traded on - the data breach itself - is ubiquitous in the Indictment. The Indictment explains that unknown individuals obtained access to some of Equifax's databases (¶ 6); that Equifax discovered this suspicious activity and attempted to determine the scope of the breach (¶¶ 7-8); that Equifax enacted a “blackout date” for trading for those aware of the breach (¶ 11); that Defendant was “asked to assist in responding to the breach, although he was not informed that Equifax had been breached” (¶ 12); that Defendant sent a text saying “We may be the one breached” (¶ 13); and that Defendant ...

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