Robert J. Prevett, et al.; David Chang, et al.; Geoffrey Chang, et al.; Atul Bhagat, et al.; Ken C. Chow, et al.; Mark Apton, et al.; Evan K. Lau

Litigation Release No. 17243 / November 19, 2001

SECURITIES AND EXCHANGE COMMISSION v. ROBERT J. PREVETT, ET AL., United States District Court for the Northern District of California, Civil Action No. C-01-21069-PVT

SECURITIES AND EXCHANGE COMMISSION v. DAVID CHANG, ET AL., United States District Court for the Northern District of California, Civil Action No. C-01-21071-PVT

SECURITIES AND EXCHANGE COMMISSION v. GEOFFREY CHANG, ET AL., United States District Court for the Northern District of California, Civil Action No. C-01-21070-RS

SECURITIES AND EXCHANGE COMMISSION v. ATUL BHAGAT, ET AL., United States District Court for the Northern District of California, Civil Action No. C-01-21073-RS

SECURITIES AND EXCHANGE COMMISSION v. KEN C. CHOW, ET AL., United States District Court for the Northern District of California, Civil Action No. C-01-21067-PVT

SECURITIES AND EXCHANGE COMMISSION v. MARK APTON, ET AL., United States District Court for the Northern District of California, Civil Action No. C-01-21068-PVT

SECURITIES AND EXCHANGE COMMISSION v. EVAN K. LAU, United States District Court for the Northern District of California, Civil Action No. C-01-21072-PVT

The Securities and Exchange Commission today announced the filing of seven civil complaints against 15 persons for insider trading in the securities of nVIDIA Corporation, a Santa Clara, California maker of computer graphics processors. The actions allege that the defendants (including 11 nVIDIA employees and four tippees) traded after learning, in March 2000, that nVIDIA had just won a lucrative contract to provide graphics components for Microsoft Corporation's new video game console, the X-Box. Collectively, the defendants earned more than $1.7 million in illegal profits. Simultaneous with the filing of the complaints, the Commission also announced settlements with two of the defendants.

According to today's filings, on Sunday, March 5, 2000, nVIDIA and Microsoft entered into an agreement providing for nVIDIA to design and manufacture computer graphics components for Microsoft's X-Box. That evening, nVIDIA's president and chief executive officer sent an email entitled "X is Ours!" to all nVIDIA employees, informing them of the agreement and its expected revenue impact on nVIDIA. The next morning, March 6, nVIDIA's vice president of marketing sent an email to all nVIDIA employees reminding them that news of the X-Box agreement was confidential.

On the morning of March 6, 2000, after receiving both emails, the 11 employee defendants began to buy nVIDIA stock. In addition, three of the employee defendants tipped a total of four friends and relatives, who also bought nVIDIA stock.

From March 7 through March 9, 2000, nVIDIA's share price soared, as rumors about the X-Box contract circulated on the Internet and in the press. After Microsoft announced the X-Box agreement to the public on the morning of March 10, 2000, nVIDIA shares continued to rise, closing that day at $118 per share, more than twice the closing price on March 6.

Today's actions allege insider trading against the following defendants:

  • Robert Prevett is an nVIDIA engineer residing in Sunnyvale, California. On March 6, 2000, Prevett bought 10,000 shares of nVIDIA stock, for profits of $595,000. On the evening of March 6, Prevett tipped his girlfriend Wendy Goody, a stockbroker who lives in Pleasanton, California. That night, Wendy Goody also tipped her father, Clifford Goody, a plumbing contractor who lives in Red Bluff, California. The next morning, March 7, Wendy Goody bought 6,000 shares of nVIDIA stock and Clifford Goody bought 1,150 shares, for profits of $259,525 and $37,250, respectively.

  • Geoffrey Chang is an nVIDIA engineer residing in Castro Valley, California. On March 6, 2000, Geoffrey Chang bought 5,450 shares of nVIDIA stock on behalf of himself, his wife, and his father, for profits of $324,275.

  • Ken Chow is an nVIDIA engineer residing in Fremont, California. On March 6, 2000, Chow bought 4,000 shares of nVIDIA stock, for profits of $238,000.

  • David Chang is an nVIDIA engineer residing in San Jose, California. On March 6 and 7, 2000, David Chang purchased a total of 2,000 shares of nVIDIA stock, for profits of $70,813. On the morning of March 6, David Chang also tipped his friend Qwai Hoong Low, an engineer at a San Francisco Bay Area software company who resides in Cupertino, California. Low purchased 500 shares of nVIDIA stock on March 6, for profits of $18,439.06. In a settlement with the Commission, in which he neither admits nor denies liability, Low has agreed to disgorge his illegal profits plus prejudgment interest, to pay a penalty of $18,439.06, and to an injunction against future violations.

  • Jack Lau is an nVIDIA engineer residing in Fremont, California. On March 6, 2000, he bought 1,250 shares of nVIDIA stock, for profits of $74,375.

  • Atul Bhagat is an nVIDIA engineer residing in San Jose, California. On March 6, 2000, Bhagat purchased 1,000 shares of nVIDIA stock, for profits of $59,500. That evening, Bhagat tipped his brother, Amit Bhagat, who was then employed by another company but now works as a financial analyst at nVIDIA. On the morning of March 7, Amit Bhagat purchased 75 shares of nVIDIA stock, for profits of $2,929.

  • John Lin is an nVIDIA engineer residing in Fremont, California. On March 6, 2000, Lin bought 1,000 shares of nVIDIA stock, for profits of $50,725. In a settlement with the Commission, in which he neither admits nor denies liability, Lin has agreed to disgorge his illegal profits plus prejudgment interest and to an injunction against future violations.

  • Son Phan is an nVIDIA engineer residing in San Jose, California. On March 6, 2000, Phan purchased 350 shares of nVIDIA stock, for profits of $20,825.

  • Rajiv Agrawal is an nVIDIA engineer residing in Fremont, California. On March 6, 2000, Agrawal purchased 200 shares of nVIDIA stock, for profits of $11,900.

  • Evan Kong Lau is an nVIDIA engineer residing in Cupertino, California. On March 6, 2000, he purchased 200 shares of nVIDIA stock, for profits of $11,900.

  • Mark Apton was a contract worker at nVIDIA in March 2000. He is currently an employee in nVIDIA's human resources department, residing in Fremont, California. Apton purchased 86 shares of nVIDIA stock on March 6, 2000, for profits of $5,117.

Today's filings also allege that, in December 1999 and February 2000, nVIDIA's president and chief executive officer distributed earlier company-wide emails apprising nVIDIA employees of the status of negotiations with Microsoft concerning the X-Box contract. According to the complaints, Prevett, Geoffrey Chang, David Chang, and Evan Kong Lau also traded nVIDIA securities based on this inside information.

The actions announced today follow the Commission's August 2000 complaint against Manu Shrivastava, a former nVIDIA engineer who also traded based on inside information concerning nVIDIA's win of the Microsoft X-Box contract. In November 2000, Shrivastava pleaded guilty to one count of securities fraud in a parallel criminal action brought by the United States Attorney's Office for the Northern District of California. The Commission's lawsuit against Shrivastava is currently in litigation.

The Commission seeks disgorgement of defendants' profits, plus interest, civil monetary penalties for insider trading, and an order from the court permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

Complaints in this matter.
*  SEC v. Mark Apton, Rajiv Agrawal, and Son D. Phan
*  SEC v. Atul Bhagat and Amit Bhagat
*  SEC v. David Change and Qwai Hoong Low
*  SEC v. Geoffrey C.P. Chang
*  SEC v. Ken C. Chow, Jack C. Lau, and John C. Lin
*  SEC v. Evan Kong Lau
*  SEC v. Robert J. Prevett, Wendy Goody, and Clifford D. Goody