On June 25, 2021, the District Court for the District of Northern California approved settlements reached between the Securities and Exchange Commission and four of the six members of an illegal securities trading ring. Nathaniel Brown, Benjamin Wylan, Naveen Sood, Marcus Bannon, Matthew Rauch and Naresh Ramaiya were all charged with insider trading for engaging in a scheme in which the trading members bought and sold securities based on material nonpublic information that was shared by two of its members. The SEC reports that the trading ring generated illegal profits and avoided losses totaling nearly $1.7 million. Judgments were entered for each member of the trading ring except for Brown.
According to the complaint, from April 2016 to November 2017, Brown, a senior revenue manager for networking solutions company Infinera Corporation, regularly shared material nonpublic information related to his employer’s quarterly financials with Wylam, who traded Infinera securities before the information was made public and then passed along the information to Sood. Sood not only traded based on the inside information but also shared it with Bannon, Rauch, and Ramaiya, who also used the information to trade. In October 2016, Bannon, an account manager for cybersecurity solutions company Fortinet, Inc., learned of unexpected preliminary negative earnings by his company, and shared this material nonpublic information with his friend Sood, who used the information to trade and then passed it along to Wylam and Ramaiya, who also used the information to trade. The complaint also alleges that Wylam, who made more than $1 million in illicit profits, bragged on an internet message board that his friends worked in publicly-traded Silicon Valley companies and commented, “Insider trading is part of my investment strategy.”
All six members of the trading ring were charged by the SEC with violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. Three members – Bannon, Rauch and Ramaiya – consented to the entry of final judgments without admitting or denying the allegations against them, in which Bannon agreed to pay a $281,497 civil penalty, and Rauch and Ramaiya agreed to pay civil penalties of $128,230 and $65,780 respectively. Sood also consented to the entry of a final judgment, agreeing to pay a civil penalty of $178,320. Under the settlements, Bannon, Rauch, Ramaiya, and Sood are also permanently enjoined from further securities violations. Wylam, who also consented to be permanently enjoined from further securities violations, agreed to pay a civil penalty in an amount to be determined by the court at a later date. Litigation against Brown continues.
On June 15, 2021, federal prosecutors announced that parallel criminal charges were filed against Brown, Wylam, and Sood for their roles in the trading scheme.