On October 17, 2024, the Securities and Exchange Commission announced that it reached a settlement to resolve insider trading charges filed against Umapathi Kakkera. The charges were related to the purchase of NeoPhotonics Corporation securities ahead of an announcement regarding the company’s impending acquisition by Lumentum Holdings Inc. in November 2021.
According to the SEC’s Order, Umapathi Kakkera purchased NeoPhotonics securities based on material nonpublic information received from Amit Bhardwaj, Lumentum’s Chief Information Security Officer at the time, who learned of the impending acquisition in the normal course of business. In breach of his duty of trust and confidence to Lumentum, Bhardwaj allegedly shared the MNPI with three friends, including Srinivasa Kakkera, ahead of the announcement. According to the SEC, Srinivasa purchased NeoPhotonics securities based on the tip and allegedly shared the MNPI with his brother Umapathi Kakkera, who purchased NeoPhotonics call option contracts based on the tip. Following the announcement, NeoPhotonics stock price rose by approximately 39 percent allegedly enabling Umapathi to generate more than $200,000 in profits from the illegal trades.
The SEC charged Umapathi Kakkera with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder for his role in the scheme. Umapathi decided to resolve the charges by entering into a settlement in which he consented to the entry of a cease-and-desist order against him without admitting or denying the SEC’s allegations. As part of the settlement, he also agreed to disgorge approximately $206,000, pay more than $30,000 in prejudgment interest, and pay a civil penalty of approximately $206,000.
In 2022, Bhardwaj, Srinivasa Kakkera and others were charged in the Southern District of New York for their alleged roles in the insider trading scheme. After pleading guilty to criminal charges in 2023, Bhardwaj was sentenced to 24 months in prison and barred from serving as an officer or director of a registered company. He also agreed to forfeit more than $575,000 and was ordered to pay a $975,000 fine. After pleading guilty to criminal charges, Srinivasa Kakkera was sentenced, in January 2024, to 18 months in prison. He also agreed to forfeit nearly $2.5 million derived from the scheme and was ordered to pay a $75,000 fine.
In June 2024, Bhardwaj and Srinivasa Kakkera reached separate settlements with the SEC to resolve civil charges related to the scheme in which they agreed, among other things, to be permanently enjoined from federal securities violations. In addition, their obligations to disgorge illegal profits and pay prejudgment interest were deemed satisfied by the forfeiture orders in their criminal cases.
SEC Litigation Release | SEC Order | SEC Litigation Release – June 2024