Analyst John Kinnucan is being charged with two counts of securities fraud, two counts of conspiracy, and insider trading for leaking sales numbers from Apple, reportsReuters. The lawsuits against the analyst were filed in a U.S. District Court in Manhattan, and he was arrested on Thursday.
Kinnucan received tips from Apple’s suppliers SanDisk and Flextronics, so he could leak sales numbers and forecasts to hedge funds. One SanDisk exec, Don Barnetson, is also in court on counts for insider trading. Kinnucan leaked the secret information about the iPhone’s sales between 2008 and 2010, and would get the information by bribing suppliers. He is rumored to have earned $1.58 million for leaking Apple’s trade secrets.
Between 2008 and 2010, investigators said, Kinnucan paid insiders with cash, trips and other benefits to get secret information, including sales trends for Apple Inc’s iPhone. Kinnucan then funneled the information to hedge fund traders in California and New York in exchange for hundreds of thousands of dollars, investigators said.
Kinnucan’s arrest is part of a bigger crack down on insider trading within hedge funds. Over 60 people have already been arrested during the operation, dubbed Operation Perfect Hedge, including a Flextronics exec for leaking sales numbers of the iPhone.
Kinnucan is currently in police custody until another hearing on Wednesday.
“Insider trading basically comes down to where you know or ought to know that the person from whom you’re getting this information has a duty to someone else to keep it confidential,” said former Securities and Exchange Commission Paul Atkins in a video interview with The Wall Street Journal. “If you go in and pay the mail clerk to give you special information, that’s not proper.”