An Indian IT professional and his four friends have been charged by the Securities and Exchange Commission (SEC) with insider trading for repeatedly trading on confidential earnings information about a Silicon Valley cloud-computing company, reaping millions of dollars in trading profits.
Janardhan Nellore, 42 a former IT administrator at the technology company in Silicon Valley, was at the center of the trading ring, using his IT credentials and work contacts to obtain highly confidential information about his employer's quarterly earnings and financial performance, the Commission said in a statement.
As alleged in the complaint, until he was terminated earlier this year, Nellore traded in his company's securities based on the confidential information or tipped his friends, Sivannarayana Barama, 45, Ganapathi Kunadharaju, 41, Saber Hussain, 42, and Prasad Malempati, 50, who also traded.
The SEC's complaint alleges that the defendants sought to evade detection, with Nellore insisting that the ring use the code word "baby" in texts and emails to refer to his employer's stock, and advising they "exit baby," or "enter few baby."
At the peak of their scheme in 2017, Nellore, Barama, Kunadharaju, Hussain, and Malempati reaped more than USD 7 million in illegal trading profits.
The complaint also alleges that certain traders kicked back trading profits to Nellore in small cash transactions in order to avoid bank scrutiny and reporting requirements.
After the FBI interviewed Nellore about the trading in May, he purchased one-way tickets to India for himself and his family and was arrested at the airport.
"Nellore and his friends exploited Nellore's access to valuable earnings information and attempted to hide their misconduct using code words and carefully tailored cash withdrawals," Director of the SEC's San Francisco Regional Office Erin Schneider said.
The SEC's complaint, filed in the Northern District of California, charges Nellore, Barama, Kunadharaju, Hussain, and Malempati with fraud and seeks permanent injunctions, disgorgement with prejudgment interest, and penalties. The U.S. Attorney's Office for the Northern District of California has also announced criminal charges against Nellore and Barama.
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