SEC uses data analytics tools in three insider trading cases
The Securities and Exchange Commission has filed insider trading charges against nine people in connection with three separate alleged schemes that together yielded more than $6.8 million in ill-gotten gains. Those charged include a former Chief Information Security Officer (CISO), an investment banker and a former FBI intern, all of whom allegedly shared confidential information with their friends, who then exchanged this confidential information. Each of the three actions announced came from the SEC’s Enforcement Division’s Market Abuse Unit (MAU) Detection and Analysis Center, which uses data analysis tools to detect suspicious business models.
Today we filed insider trading charges against 9 people in connection with 3 separate alleged schemes that together yielded over $6.8 million in ill-gotten gains. Those charged include a former information security officer, an investment banker and a former FBI intern.
— US Securities and Exchange Commission (@SECGov) July 25, 2022
The SEC’s enforcement actions were filed in Manhattan Federal District Court, and in each case, the US Attorney’s Office for the Southern District of New York today announced parallel criminal charges.
“If ordinary investors think the market is rigged at their expense in favor of insiders abusing their positions, they will not invest their hard-earned money in the markets,” said Gurbir S. Grewal, director of the division. of the application of the law of the SEC. “But as today’s actions show, we stand ready to leverage all of our expertise and tools to root out misconduct and hold bad actors accountable, regardless of industry or profession. This is what is needed to restore investor confidence.
The SEC complaints accuse the nine defendants of violating anti-fraud provisions of securities laws and seek a permanent injunction, reimbursement with prejudgment interest and civil penalties. In all three cases, the SEC investigation is ongoing.
The Information Security Manager gave advice to his friends
In a lawsuit, the SEC alleges that Amit Bhardwaj, the former CISO of Lumentum Holdings Inc., and his friends, Dhirenkumar Patel, Srinivasa Kakkera, Abbas Saeedi and Ramesh Chitor, negotiated ahead of two company acquisition announcements by Lumentum, thereby generating more than $5.2 million in illicit profits.
The SEC complaint alleges that, through his work at Lumentum, Bhardwaj learned from material nonpublic information (MNPI) about the company’s plans to first acquire Coherent, Inc., and then to acquire NeoPhotonics Corporation. Based on this MNPI, Bhardwaj allegedly purchased Coherent securities prior to the January 2021 announcement of Lumentum’s deal to acquire Coherent and tipped his friend Patel on the understanding that Patel would later share some of his winnings. ill-gotten. The SEC further alleges that in October 2021, Bhardwaj shared MNPI on the planned acquisition of NeoPhotonics by Lumentum with his friends Kakkera, Saeedi and Chitor, who then amassed large NeoPhotonics positions based on Bhardwaj’s advice. . After the announcement of the NeoPhotonics acquisition in November 2021, Chitor indirectly transferred funds to Bhardwaj’s parent in India as per Bhardwaj’s instructions.
In addition to the relief described above, the SEC’s complaint seeks disgorgement of illicit profits with prejudgment interest from relief defendants Gauri Salwan, the Kakkera Family Trust, All US Tacos Inc., and Janya Saeedi. The case was investigated by Ann Marie Preissler, Joshua Geller, John Rymas and Simona Suh of MAU, and Elzbieta Wraga of the New York Regional Office (NYRO). Ms. Preissler, Mr. Geller and Ms. Suh will lead the SEC litigation.
Investment banker friend
In a separate action, the SEC alleges insider trading by investment banker Brijesh Goel and his friend Akshay Niranjan, who was a forex trader at a major financial institution. The SEC alleges the pair, close friends from business school, made more than $275,000 from illegal trading before four acquisition announcements in 2017 that Goel learned about through his employment. The complaint further alleges that Niranjan purchased call options on the target companies and then wired Goel $85,000 for Goel’s share of the proceeds.
The case was investigated by Andrew Palid, David Makol and Michele T. Perillo of the MAU, and by Chip Harper of the Boston Regional Office (BRO). MM. Harper and Palid along with BRO’s Amy Burkart will lead the SEC litigation.
Former FBI friend
Finally, in a third action, the SEC alleges that Seth Markin, a former FBI intern, and his friend Brandon Wong earned approximately $82,000 and $1.3 million, respectively, from illegal trading prior to the announcement in February. 2021 Tender Offer by Merck & Co., Inc., to Acquire Pandion Therapeutics, Inc. SEC Complaint Alleges Markin Secretly Reviewed Binder of Tender Offer Agreement Documents of his then-romantic partner, who worked as an associate for a law firm representing Merck on the transaction, traded on the MNPI, and tipped his close friend Wong. The complaint alleges that after the announcement, Wong bought a Rolex watch from Markin to thank him for the tip.
The case was investigated by Tracy Sivitz, Chevon Walker, John Rymas and Simona Suh of MAU, and Neil Hendelman of NYRO. Ms. Sivitz, Walker and Suh will lead the SEC litigation. All three cases are overseen by MAU Chief Joseph G. Sansone.
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The SEC appreciates the assistance of the US Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, the Office of the Inspector General of the US Department of Justice and the Financial Industry Regulatory Authority.