March 30, 2022

SEC charges three California engineers and four of their friends and family members with insider trading

On March 28, 2022, the US Securities and Exchange Commission announced that insider trading charges were filed against Hari Sure, Lokesh Lagudu and Chotu Pulagam, three software engineers employed by Twilio, Inc., a California-based cloud computer communications company.  The SEC also charged four of the engineers’ friends and family members for unlawfully trading in Twilio securities in advance of the company’s first quarter 2020 earnings announcement.  

According to the SEC’s complaint, the three engineers had access to databases that contained material, nonpublic information (MNPI) related to Twilio’s revenues and learned in approximately March of 2020 that Twilio customers had substantially increased their reliance on cloud communications because of the pandemic, causing earnings to exceed securities analysts’ reported estimates.  The engineers allegedly engaged in discussions regarding the increased quarterly earnings between March and May of 2020 within a private chat channel that they created at Twilio and, after concluding that stock prices would “rise for sure” after the earnings were announced, shared the MNPI with four friends and family members who purchased securities ahead of the May 6, 2020 announcement.  Among the tippees was Dileep Kamujula who successfully traded in Twilio’s call options based on tips from his close friend Hari Sure.  According to court documents, Twilio’s closing stock price increased by approximately 40 percent following the announcement causing the friends/family members to collectively generate more than $1 million in illicit profits.

The complaint, which was filed by the SEC in District Court for the Northern District of California, charged the three engineers and their four friends/family members with violating the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder for their roles in the insider trading scheme.  

On the same day, the US Attorney’s Office for the Northern District of California announced that a separate criminal action was filed against Kamujula, and he was indicted by a federal grand jury for securities fraud in connection with his participation in the scheme.  According to the indictment, which was unsealed on March 28, 2022, Kamujula made approximately $961,000 in unlawful profits after he sold all 257 Twilio call options that he acquired in the preceding four weeks.

SEC Press Release | SEC Complaint | USAO of Norther CA Press Release | Unsealed Criminal Indictment