Two Indian-American doctors among six persons have been charged by federal regulator with in an insider trading scheme where they reaped nearly $300,000 from confidential information.
Suken Shah and his brother Shimul Shah received confidential tips from Christopher Saridakis, the CEO of the e-commerce company about its proposed acquisition by eBay in March 2011.
The federal regulator Securities and Exchange Commission alleges that Saridakis tipped his friend Suken Shah, a Delaware-based doctor with nonpublic information about the deal following a meeting with eBay executives.
Shah earned insider trading profits of $9,838 and provided the nonpublic information to his brother and another individual.
Shah agreed to settle the SEC's charges in an administrative proceeding by paying disgorgement of $10,446, which includes $609 in trading profits made by the other individual he tipped.
He also agreed to pay prejudgment interest of $1,007 and a penalty of $64,965 for a total of $76,418. Shah's penalty is three times the amount of his and his tippees' trading profits.
In a separate settled administrative proceeding, the SEC charged Shimul Shah, a doctor who now resides in Cincinnati, with insider trading on the nonpublic information he received from his brother. Besides trading himself, Shah tipped others with the nonpublic information during a group dinner he attended with several friends from his medical residency.
To settle the SEC's charges, Shah agreed to disgorge his trading profit of $11,209 and pay prejudgment interest of $1,022 and a penalty of $22,418 for a total of $34,650. Shah's penalty is twice the amount of his trading profit.
The individual who entered the non-prosecution agreement was tipped by Shah at the group dinner. This individual has agreed to disgorge a trading profit of $431,777 and pay $2,725 in prejudgment interest for a total of $34,502.
The SEC alleges that Saridakis violated his duty of trust as CEO of the marketing solutions division of GSI Commerce by providing the nonpublic information about the pending acquisition to his friends and encouraging them to trade on it.
In settling the SEC's charges, Saridakis agreed to an officer-and-director bar and must pay $664,822, which includes a penalty equal to twice the amount of his tippees' profits.
The five traders, including the Shahs, would pay a combined total of more than $4,90,000 in their settlements, which range from disgorgement-only or reduced penalties for cooperators to penalties of two or three times the trading profits for other traders.
"Saridakis chose to dole out confidential, market-moving information to enrich relatives and friends, and the nonpublic details then spread further through multiple levels of tippers and tippees. The SEC thoroughly investigates suspicious trading to trace it to the source and pursue all those involved," Enforcement Division associate director Scott Friestad said.