Three Indian-Americans and their associate have been charged by federal regulator in an insider trading scheme where they reaped USD 12 million in illegal profits by trading in shares of a discount clothing chain.
US Securities and Exchange Commission alleged that Saleem Khan was routinely tipped by his friend Roshanlal Chaganlal, who was a director in the finance department at Ross headquarters in California.
Khan used the confidential information to illegally trade on more than 40 occasions ahead of the company's public release of financial results.
The SEC's complaint charges Khan, Chaganlal, Mendonsa, and Akbari with violating the antifraud provisions of the federal securities laws.
The complaint seeks permanent injunctive relief, disgorgement of illicit profits plus interest, financial penalties and an officer-and-director bar against Chaganlal.
Besides trading in his own brokerage account, Khan traded in his brother-in-law's account as well as an account belonging to another acquaintance.
Khan also tipped his work colleagues Ranjan Mendonsa and Ammar Akbari so they too could trade in Ross stock options based on the nonpublic information. The insider trading resulted in collective profits of more than 12 million dollars, the SEC said.
The SEC further alleged that at the outset of the scheme, Chaganlal gave USD 17,000 to Khan for the purpose of insider trading in Ross securities using the brother-in-law's account.
Khan later funnelled USD 1,30,000 of the generated trading profits back to Chaganlal by using third-party intermediaries.
According to the SEC's complaint filed in federal court in San Francisco, Khan separately made approximately USD 4,50,000 in illicit profits by insider trading in stock options of a software company ahead of its 2012 acquisition by Oracle.
The SEC alleges that the serial insider trading involving Ross securities began in August 2009 and continued until December 2012, when Chaganlal was terminated by the company.
He had access to confidential sales figures on an internal webpage limited to a relatively small group of Ross employees.
Chaganlal regularly communicated the confidential details to Khan so he could trade ahead of impending monthly sales announcements by Ross.
Khan generated USD 5.4 million in profits, and USD 6 million in profits in his brother-in-law's account.
Khan's supervisor Mendonsa made approximately USD 8,00,000 in insider trading profits based on the nonpublic information that Khan in turn tipped to him.