The Securities and Exchange Commission today announced insider trading charges against a Silicon Valley trading ring whose members generated nearly $1.7 million in illegal profits and losses avoided by trading on the confidential earnings information of two local technology companies.
According to the SEC’s complaint, Nathaniel Brown, who served as the revenue recognition manager for Infinera Corporation, repeatedly tipped Infinera’s unannounced quarterly earnings and financial performance to his best friend, Benjamin Wylam, from April 2016 until Brown left the company in November 2017. The SEC’s complaint alleges that Wylam, a high school teacher and bookmaker, traded on this information and also tipped Naveen Sood, who owed Wylam a six-figure gambling debt. Sood allegedly traded on this information and tipped his three friends Marcus Bannon, Matthew Rauch, and Naresh Ramaiya, each of whom also illegally traded on the information.
The SEC’s complaint further alleges that Bannon tipped Sood with material, nonpublic information concerning Bannon’s employer, Fortinet Inc. As alleged in the complaint, Bannon learned in early October 2016 that Fortinet was going to unexpectedly announce preliminary negative financial results. Bannon allegedly tipped this information to Sood, who used it to trade. After learning the information, Sood allegedly tipped Wylam and Ramaiya, who also traded.
“Using sophisticated data analysis, the SEC was able to uncover this insider trading ring and hold each of its participants accountable to ensure the integrity of our markets,” said Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit. “The Commission considered relevant circumstances, including Bannon’s medical condition, in accepting these defendants’ settlement offers in order to address the concerted misconduct alleged in our complaint, which involved insider trading in the securities of two different companies for more than a year.”
The SEC’s complaint charges Brown, Wylam, Sood, Bannon, Rauch, and Ramaiya with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Bannon, Rauch, and Ramaiya consented to the entry of final judgments without admitting or denying the allegations in the complaint. Bannon agreed to pay a civil penalty of $281,497, Rauch agreed to pay a civil penalty of $128,230, and Ramaiya agreed to pay a civil penalty of $65,780. Sood also consented to the entry of a final judgment and agreed to pay a civil penalty of $178,320. The final judgments, which require court approval, would permanently enjoin Bannon, Rauch, Ramaiya, and Sood from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Wylam has consented to a permanent injunction with civil penalties, if any, to be decided later by the court. The SEC’s litigation against Brown is continuing.
In parallel proceedings, the U.S. Attorney’s Office for the Northern District of California today announced related criminal charges against Brown, Wylam, and Sood.
The SEC’s investigation was conducted by Colby Steele and David Bennett with the assistance of Matthew Koop, Darren Boerner, and Patrick McCluskey in the Enforcement Division’s Market Abuse Unit. The case was supervised by Paul Kim and Mr. Sansone. The litigation will be led by Alfred Day, Timothy Halloran, and Stephan Schlegelmilch. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Northern District of California and the Federal Bureau of Investigation.
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