Criminal Justice

Lawyer on university faculty is charged with insider trading

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A Chicago lawyer who was a faculty member at the Loyola University Chicago was indicted Monday for allegedly making a $110,000 profit by trading on insider information passed along by a college friend.

Lawyer David S. Sargent, 37, was accused of purchasing shares and call options in stock of an education-technology company called Chegg Inc., report Reuters and Law360. Sargent allegedly traded on information provided by Chegg Inc. manager Christopher Klundt, 38, of San Francisco.

Press releases are here and here; the indictment is here; and a parallel suit by the U.S. Securities and Exchange Commission is here. The SEC suit seeks civil penalties against Sargent and Klundt.

Sargent received the information from Klundt days before Chegg announced first quarter earnings in May 2020, prosecutors alleged. After the company announced its earnings, Klundt texted Sargent an emoji face with dollar signs for eyes and on its tongue, according to the SEC suit.

The SEC suit said Sargent has been on the faculty of Loyola University Chicago’s School of Environmental Sustainability since 2014. He is also the assistant general counsel of a privately held business based in Chicago.

Sargent was listed on Loyola’s website Tuesday evening, according to Reuters. But the faculty page was no longer available Wednesday afternoon. A Loyola spokesperson did not immediately return the ABA Journal’s request for information.

Sargent and Klundt attended the University of Wisconsin at Madison together, where they became friends in 2005, according to the SEC suit. While in college, the two classmates founded an online studying platform called ClassConnection, which changed its name to

Sargent left the company, but Klundt stayed on and relocated the business to San Francisco. Chegg acquired the company for $20.8 million in 2018, and Klundt remained aboard.

The indictment charges Sargent and Klundt with conspiracy, insider trading and securities fraud.

A Chegg spokesperson told Law360 and Reuters that the company is cooperating with the SEC and the U.S. Department of Justice. Klundt is no longer an employee.

Klundt’s lawyer told Law360 that he is “innocent of the charges filed against him today, and we fully intend to prove that in court.”

Sargent’s lawyer told Reuters that his client was not tipped off.

“What they have is an emoji, not a case,” the lawyer said.

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