Employees recruited to share secrets before information becomes public.

Unscrupulous Wall Street fringe taking advantage of the information, buying or selling stock before either good or damaging news hits the street.

There are many ways to make money in the tech industry, not all of them legal. Stock manipulation has become big business.

Nvidia (NVDA) and Marvell (MRVL) are the most recent to be compromised.

Winifred Jiau in California has been arrested for industry espionage for the purpose of insider trading.

Her reported $200,000 profits pale in comparison to the potential combined penalties of one $250,000 fine with a five-year prison sentence and another $5 million fine with 20 more years in prison.

The charges against her are conspiring to commit securities fraud and engaging in securities fraud for selling confidential material information about publicly traded companies.

The investigation by the office of the US Attorney in the Southern District of New York uncovered inappropriate activity between 2006 and 2008.

Hedge funds received the information from Jiau. One fund made over $820,000 by trading Marvell securities based on information she provided.

Other than acknowledging that Jiau worked as an expert consultant for them in the past, Primary Global Research refused further comment. The US Attorney similarly had nothing further to say. Nvidia admitted that Jiau had worked as a contractor, not an employee, but has been gone for a year.

Previously, James Fleishman, vice president of marketing at Primary Global Research, was arrested also for insider trading earlier in the month. Employees at Dell, which trades on Nasdaq (DELL), and Advanced Micro Devices, which trades on the New York Stock Exchange (AMD), had been involved in obtaining reports of quarterly earnings before they were released to the public and providing them to Primary Global Research.

Flextronics, a contract manufacturer for Apple (AAPL), provided numbers for the quantities of iPhones being produced. Daniel Devore, no longer a global supply manager for Dell, pleaded guilty to wire fraud. Mark Anthony Longoria, Walter Shimoon and Manosha Karunatilaka were also arrested.

FBI assistant director-in-charge Janice K. Fedarcyk said:

The information trafficked by the four ‘consultants’ went way beyond permissible market research.

The employees shared $400,000 for their involvement, which is a pittance when faced with extraordinary fines and years in an orange jump suit. All the information obtained, when released to the public, typically impacts the price of the company’s stock. Knowledgeable traders can buy or sell stock in advance of such announcements before the stock price is affected. It’s considered unfair advantage over stockholders and the general public. This shows how Wall Street can pull the strings, no matter how much you think you know about the firm you’re investing in.

In a similar case, where a hedge fund portfolio manager was sentenced for insider trading, US Attorney Preet Bharara said:

? there will be serious consequences for those who corrupt the securities markets to line their own pockets. Together with our law enforcement partners at the FBI, we will continue to work methodically to root out insider trading and corporate corruption.

The investigations are being coordinated with President Barack Obama’s Financial Fraud Enforcement Task Force. Let’s hope they bear fruit.