SAN FRANCISCO (Reuters) - The founder of a private equity firm with Chinese state backing has been charged with insider trading related to the attempted acquisition of Lattice Semiconductor Corp LSCC.O, U.S. authorities said on Monday.

The Lattice Semiconductor logo is seen in this illustration photo September 14, 2017. REUTERS/Thomas White/Illustration

The charges against Benjamin Chow represent a major blow to the buyout firm he created just last year, Canyon Bridge Capital Partners, with capital from China Reform Holdings, a Chinese state-back fund. Chow denies wrongdoing, his attorney said.

The indictment comes as Chow's fund Canyon Bridge seeks to close its 550 million pound ($737 million) acquisition of British chipmaker Imagination Technologies Group Plc IMG.L, after its $1.3 billion takeover of Lattice was blocked by U.S. President Donald Trump last month over national security concerns.

The Acting United States Attorney for the Southern District of New York and the Federal Bureau of Investigation said on Monday that Chow had conspired to commit securities fraud by sending material nonpublic information regarding the Lattice deal to an unnamed friend and former colleague.

A separate indictment by the U.S. Securities and Exchange Commission in February against that former colleague of Chow identified him as Michael Yin, a former Hong Kong-based private equity executive who had become a hedge fund manager.

Chow, a U.S. citizen born in China, is accused in the new indictment of tipping off Yin, who allegedly reaped $5 million of profit thanks to knowledge that the deal was in the works. Yin and China Reform Holdings could not be reached for comment.

The prosecutors say that Chow, 46, passed along information to Yin at in-person coffee meetings in Beijing, voice messages and text exchanges ahead of the announcement of CanyonBridge’s deal to buy Lattice.

“Benjamin Chow is a true American success story, and the charges against him are baseless and unprecedented. He is not alleged to have made a dime from the scheme, and he had no possible motive to enrich those who traded. He stood to lose enormous amounts if traders purchased the stock and drove up the company’s share price in the midst of his own negotiations,” Chow’s attorney George Canellos, a partner at law firm Milbank, Tweed, Hadley & McCloy LLP, said in a statement.

A Canyon Bridge spokesman said in a statement that it was aware of the indictment and that it is focused on completing its planned acquisition of Imagination. The fund added that it is not itself subject to any investigation.

Imagination did not immediately respond to a request for comment. Lattice declined to comment.

The indictment also said that Chow lied to the Financial Industry Regulatory Authority in response to inquiries in April about possible insider trading.

The charges against Chow carry a potential prison sentence and maximum fines of $5 million.

Canyon Bridge's funding can be traced back to China's State Council, the top decision-making body of the government, Reuters has previously reported. For a graphic, click tmsnrt.rs/2gegSQc

Canyon Bridge has been trying this year to attract investors from outside China. The indictment against its founder could represent a hurdle to these efforts.

Another Canyon Bridge partner, Ray Bingham, has also faced problems. The tech veteran joined Canyon Bridge last year but had to leave the boards of several tech companies, including Oracle Corp ORCL.O, due to concerns about his involvement with a firm with links to the Chinese state. Bingham could not be reached for comment Monday.