Feds make first arrest in latest insider trading investigation

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The government made the first arrest in its current investigation of insider trading on Wall Street, detaining an East Coast employee of a California research consulting firm used by hedge funds.

Federal prosecutors in New York disclosed charges Wednesday against Don Ching Trang Chu, who works at one of the research firms believed to be part of the government’s investigation.

Prosecutors accused Chu of conspiracy for allegedly hooking up hedge fund operators with corporate executives who provided the hedge funds with inside information about their companies.

Chu was arrested at his home in Somerset, N.J., at about 6 a.m., officials said.

One company Chu dealt with was Broadcom Corp., an Irvine-based firm that provides chips used in iPhones and other products. According to the complaint, a Broadcom employee in Taiwan provided information about the company’s revenue before the figures were publicly announced.

The complaint also says that Chu connected hedge funds with employees at Atheros Communications Inc., in San Jose, and Sierra Wireless Inc., a Canadian firm.

Chu’s firm was not identified in the complaint, but the charges cite language from the website of Primary Global Research in Mountain View, Calif., which also has offices in New York. The site also lists Chu as an employee.

The company’s website says that its ‘exclusive client base and gated network maximize the value of incremental information, giving institutional investors and analysts a strategic advantage when making investment decisions.’

No one at the company or at Broadcom could be reached immediately for comment.

The arrest marks the first official acknowledgement of an investigation that had been partially disclosed through leaks and through raids Monday at three hedge funds.

The government’s charges against Chu were built with the cooperation of Richard Choo-Beng Lee, an employee at a hedge fund that is not named in the complaint. Previous reports said that Lee worked at Spherix Capital in San Jose. Lee cooperated with the government after pleading guilty to security-fraud charges in a separate case.

The complaint alleges that in one conversation Chu told Lee: ‘As always, hope to assist you to make $$ in the market.’

-- Nathaniel Popper in New York