Split verdict in federal insider trading case involving Chicago attorney, friend

In a split verdict, a federal jury on Thursday convicted a Chicago attorney of using insider information from a friend to make a windfall in stock purchases involving an education-technology company, while acquitting the friend on all counts.

The jury deliberated for about nine hours over two days before the verdict was announced Thursday afternoon in U.S. District Judge Manish Shah’s courtroom.

The attorney, David Sargent, 38, of Glenview, was found guilty of six counts of securities fraud, but acquitted of conspiracy to commit securities fraud.

His co-defendant, Christopher Klundt, 39, of San Francisco, was found not guilty of all seven counts of conspiracy and securities fraud, a rare outcome in a building where prosecutors win more than 90% of cases that go to trial.

In an emailed statement, Klundt’s attorney, Terence Campbell, wrote that Klundt and his family were “extremely grateful to the jury for seeing the truth in this case.”

“The evidence in this case proved Mr. Klundt never engaged in any misconduct — much less any illegal behavior — and the jury’s verdict proclaims that truth loud and clear,” the statement read. “We are profoundly happy that Chris now has his life back after this long ordeal.”

Sargent’s attorney, meanwhile, called the verdict “inconsistent” and said he would be filing a motion for post-trial judgment of acquittal.

“It is impossible for a rational jury to have found that Mr. Klundt had not tipped Mr. Sargent, and yet somehow also found that Mr. Sargent was tipped,” attorney Christopher Grohman said.

An indictment filed in January 2022 accused Sargent of obtaining nonpublic information from Klundt, a close friend and former colleague, about Chegg, the California-based education technology company where Klundt was a manager.

The information pertained to the company’s 2020 first quarter earnings, which Klundt knew would be strong based on internal meetings he had attended, the indictment alleged. The indictment included an emoji Klundt allegedly texted to Sargent after the earnings call featuring a face with dollar signs for eyes.

After receiving the information from Klundt, Sargent purchased numerous shares and call options of the company’s stock ahead of the earnings announcement, then quickly sold them after the information became public for a total profit of about $110,000, prosecutors alleged.

According to the indictment, Sargent and Klundt had been friends since attending the University of Wisconsin at Madison together. They co-founded an online studying platform for high school and college students, and continued to collaborate after Sargent left to earn his law degree from the University of Illinois College of Law. Klundt was also a groomsman at Sargent’s wedding, according to the charges.

Klundt denied knowing Sargent, however, when federal regulators asked about people who’d traded Chegg securities in advance of the May 2020 earnings release, the indictment stated.

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