Seven people of Indian descent have been charged by U.S. federal authorities with insider trading in a scheme through which they earned more than a million dollars in illegal profits.
Hari Prasad Sure, 34, Lokesh Lagudu, 31 and Chotu Prabhu Tej Pulagam, 29, are friends and work as software engineers at Twilio, a San Francisco -based cloud computing communications company, the Securities and Exchange Commission said yesterday.
The complaint said Mr Sure told his close friend Dileep Kumar Reddy Kamujula, 35, who managed to trade in Twilio options. Mr Lagudu also told his girlfriend Sai Nekkalapudi, 30 who lives with him, and he also told his former roommate and close friend Abhishek Dharmapurikar, 33. Mr Pulagam told his brother Chetan Prabhu Pulagam, 31. All seven defendants live in California.
The SEC announced insider trading charges against the seven individuals for allegedly generating a collective profit of more than USD 1 million by insider trading ahead of Twilio’s first quarter 2020 positive earnings announcement on May 6, 2020.
According to the SEC complaint, Mr. Pasti, Mr. Lagudu and Mr. Chotu Pulagam had access to various databases related to Twilio revenue reporting.
As alleged, around March 2020, they learned through a database that Twilio customers had increased consumption of the company’s products and services in response to health measures taken in light of the Covid-19 pandemic, and concluded in a joint chat that Twilio’s share price would “rise for sure. “
The SEC complaint alleges that despite accepting company policies prohibiting them from insider trading, Mr. Sure, Mr. Lagudu and Mr. Chotu Pulagam knowingly informed, or used the brokerage accounts of Mr. Kamujula, Ms. Nekkalapudi, Mr. Dharmapurikar and Chetan Pulagam to trade Twilio options and shares prior to the May 6, 2020 earnings announcement while in possession of confidential information regarding customer usage.
According to the complaint, the scheme generated more than USD 1 million in illegal trading profits.
The SEC complaint says that Mr Sure, Mr Lagudu and Mr Chotu Pulagam “communicate occasionally in Telugu, a language frequently used in some parts of India.” From late March to early May 2020, they engaged in discussions about upcoming earnings announcements in a personal chat channel they created on Twilio.
“On several occasions between late March and early May 2020, prior to Twilio’s public revenue announcement, Mr Pasti, Mr Lagudu and Mr Chotu Pulagam used internal chat channels to discuss in Telugu whether Twilio might exceed market expectations in its quarterly earnings report, which will released in May 2020. “
The complaint said that “armed with valuable inside information”, which they obtained from Twilio, Mr Sure, Mr Lagudu and Mr Chotu Pulagam began conveying tips to their family and friends through phone calls and face -to -face visits prior to Twilio’s earnings announcement on May 6, 2020 .
“We claim that this insider trading ring took advantage of valuable revenue information related to the outbreak at San Francisco technology companies,” said Monique C. Winkler, Acting Regional Director of the SEC’s San Francisco Regional Office.
“We are holding on to the allegations of moneylenders and these people are responsible for their role in the scheme.” The SEC complaint adds that Mr. Kamujula, Ms. Nekkalapudi, Mr. Dharmapurikar, and Chetan Pulagam themselves are employees of other publicly traded companies, and they understand it is inappropriate for insiders to tip others to trade securities based on material and non -public information. . Mr. Pasti, Mr. Lagudu and Mr. Chotu Pulagam used their friends and family to personally profit from their insider trading schemes and to evade detection.
On May 4, 2020 (just two days before Twilio’s scheduled earnings announcement), Mr. Sure, Mr. Pulagam, and Mr. Chotu Pulagam discussed in a chat channel their expectation that Twilio’s share price, which then traded around USD 110 per share, would rise sharply following earnings announcement and ready to sell limited stock units of their own company after the announcement.
“Of course noticed”[l]ooks like [the stock price] will be $ 150, “to which Chotu Pulagam replied” Miillionaireeeeee “,” the complaint said.
The SEC complaint, filed in the Northern District of California, alleges each defendant violated the anti-fraud provisions of the Securities Exchange Act. The U.S. Attorney’s Office for the Northern District of California also announced criminal charges against Mr. Kamujula.
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