SEC Insider Trading Cases Lead to Civil Charges, Frozen Brokerage Accounts, and Restitution

In a Securities and Exchange Commission case linked to parallel criminal charges, the regulator has filed insider trading charges against Avaneesh Krishnamoorthy, the risk management VP of a New York-based investment bank. Krishnamoorthy is accused of trading on confidential information prior to the acquisition of a publicly-traded tech company by a private equity firm. He allegedly made about $48K in illicit profits. Also charged as a relief defendant is his wife Shreya Achar.

According to the SEC, Avaneesh Krishnamoorthy began trading in Neustar Securities after learning that Golden Gate Capital was going to buy the company. He used two brokerage accounts that his employer didn’t know about. Golden Gate Capital had approached the investment bank about financing the acquisition.

Meantime, the U.S. Attorney’s Office for the Southern District of New York has filed its own case against Krishnamoorthy. He faces one criminal securities fraud charge.

This is the first criminal insider trading case brought by the Office of Acting U.S. Attorney Joon Kim in Manhattan. He replaced former US Attorney Preet Bharara who was fired by President Donald Trump.

SEC Freezes Assets In Alleged $1M Insider Trading
In another insider trading case brought by the SEC, the regulator was able to secure a court order freezing assets in two brokerage accounts that were allegedly involved in making over $1M in insider trading profits. The Commission said it was aware of “highly suspicious transactions” involving news that Liberty Interactive Corp. would acquire General Communications Inc., both of which are telecommunications companies.

The traders who purportedly were involved—their identities are not known at this time—are accused of using brokerage accounts in Lebanon and the UK to purchase call option contracts through broker-dealers in the US and on US-based exchanges before the acquisition announcement on April 4. The order, issued by the court, freezes the money in these foreign accounts.

The SEC said that a number of the risky options positions made in these brokerage accounts comprised practically all of the markets for the options. When the merger was announced, shares for General Communications went up by over 62%.

Afterwards the customers holding those brokerage accounts allegedly sold most of the contracts. (Prior to the news, they had not engaged in any recent trading in these accounts involving these specific market securities.) The SEC cited these as some of the reasons why it believes insider trading was involved.

According to the court order, the traders will have to send the money made from the alleged insider trading back to the US. The Commission also wants to impose a penalty.

Peruvian Traders Will Disgorge Insider Trading Gains
In another unrelated, older insider trading case brought by the SEC last September, three Peruvian traders have now agreed to disgorge their allegedly ill-gotten profits that they made from insider trading prior to the merging of two mining companies. Last month, a U.S. District Court for the Southern District of New York approved the settlement reached with alleged tipper Nino Coppero del Valle, his friend attorney Julio Antonio Castro Roca, and Ricardo Carrion. Coppero del Valle will disgorge more than $53K plus interest, Castro Roca will disgorge over $59K and interest, and Carrion will disgorge over $40K plus interest.

Castro Roca is accused of trading on the insider information provided him by Coppero del Valle, which was that HudBay Minerals was involved in a tender offer to acquire Augusta Resource Corp. shares. The two of them allegedly made over $112K in illegal profits. Meantime, Coppero del Valle also tipped Carrion.

Because of this information, contends the Commission, Carrion’s broker-dealer bought Agusuta Resource shares before the tender offer was announced and made $73K in alleged profits.

The SSEK Partners Group is a securities fraud law firm.

The SEC Complaint in the Krishnamoorthy Case (PDF)

The SEC Complaint in the Liberty Interactive Corp. Case (PDF)

Overseas Traders Paying Back All Profits Plus Penalties In Insider Trading Case, SEC, March 24, 2017

The SEC Complaint in the Peruvian Traders’ Case (PDF)