On July 25, 2022, the Securities and Exchange Commission charged Amit Bhardwaj, the former Chief Security Officer for Lumentum Holdings Inc., a California-based telecommunications equipment company, with insider trading along with his friends Dhirenkumar Patel, Srinivasa Kakkera, Abbas Saeedi, and Ramesh Chitor in connection with improper trading ahead of Lumentum’s announcements regarding agreements to acquire Coherent, Inc. and NeoPhotonics Corporation in 2021.
According to the SEC’s complaint, while working as Lumentum’s Chief Information Security Officer (CISO), Bhardwaj obtained material nonpublic information (MNPI) about the company’s plan to acquire Coherent in late 2020. In the weeks before the acquisition’s announcement, Bhardwaj allegedly misappropriated the MPNI by purchasing Coherent securities for himself and from accounts held in the name of his wife Salwan. In exchange for a promise to share in the profits, Bhardwaj also allegedly tipped his friend Patel and not only encouraged him to purchase Coherent securities but also provided him with some of the funds for those purchases. When the acquisition was announced in January 2021, Coherent’s stock rose by almost 29 percent and Bhardwaj, Salwan and Patel allegedly generated illicit gains totaling approximately $900,000.
In its complaint, the SEC also asserts that, ten months later, Bhardwaj tipped his friends Kakkera, Saeedi, and Chitor to purchase NeoPhotonic securities after learning of Lumentum’s plan to purchase the company. According to the complaint, each friend purchased NeoPhotonics securities based on this MNPI. Chitor allegedly purchased securities from an account held in his own name. Kakkera is accused of making multiple purchases using accounts held in his own name and accounts in the name of the Kakkera Family Trust, while Saeedi’s purchases were placed from accounts in his name, in the name of his wife Jayna Saeedi, and in the name of his entity All US Tacos. Following the acquisition announcement in November 2021, the company’s stock increased by more than 38 percent causing Chitor, Kakkera, the Kakkera Family Trust, Saeedi, Janya Saeedi, and All US Tacos to generate combined illegal profits of more than $5.2 million. According to the complaint, Chitor, Kakkera and Saeedi also shared a portion of their profits with Bhardwaj.
The SEC charged the five defendants – Bhardwaj, Patel, Kakkera, Saeedi and Chitor – with violating the antifraud provisions of Section 10(b) of Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking to permanently enjoin each defendant from further violations of these provisions and requesting payment of disgorgement, pre-judgment interest and civil monetary penalties. The SEC is also requesting disgorgement of illegal profits obtained by relief defendants Salwan, the Kakkera Family Trust, All US Tacos Inc., and Janya Saeedi.
On the same day, the US Attorney’s Office for the Southern District of New York filed a parallel action for criminal charges against the five defendants in connection with the illegal trades. The Department of Justice reports that Patal and Chitor are cooperating with federal investigators and have pled guilty to their charges. However, in addition to securities fraud and wire fraud charges, the DOJ reports that Bhardwaj, Kakkera, and Saeedi were also charged with conspiracy to obstruct justice after investigators discovered that the three met to discuss potential false stories that would conceal their scheme and created false documents to support their story. According to the DOJ, Bhardwaj also sought Patal’s assistance in deleting potential incriminating information from his work laptop.