Two friends were charged by the SEC for wrongly profiting from inside trading after hearing unpublished news of a proposed acquisition of Cooper Tire and Rubber Company by Apollo Tyres Ltd.
The SEC filed a complaint in a U.S. District Court, charging fraudulent insider trading against Amit Kanodia, an equity investor and Iftikar Ahmed, a general partner at a venture capital firm. Both traders are charged with parallel criminal charges in the U.S. Attorney’s Office for the District of Massachusetts.
The SEC alleges that Apollo Tyres, an India-based company, was engaged in absolute negotiations to acquire Cooper Tire. When the acquisition was announced in June 2013, Cooper Tire’s stock price skyrocketed 41 percent, although the acquisition was never completed. The SEC alleged that Kanodia tipped Ahmed and another friend of the future acquisition after learning of the deal from his wife, who was the general counsel at Apollo at the time the company was in the works of acquiring Cooper Tire.
Kanodia illegally shared highly confidential information with Ahmed, who immediately began buying large amounts of Cooper Tire stock and options. As soon as the acquisition was publicly announced, Ahmed liquidated his Cooper Tire holdings, profiting more than $1.1 million overnight. Ahmed then paid Kanodia a cut by transferring $220,000 to a charity that was a cover-up charity controlled by Kanodia.
Another friend of Kanodia also illegally traded and profited based on insider information. This friend paid Kanodia a kickback through the same supposed charity.
“We allege that Kanodia gave inside information to two close friends who then kicked back a portion of their insider trading profits to a supposed charity that Kanodia controlled,” said Joseph Sansone, Co-Deputy Chief of the SEC Enforcement Division’s Market Abuse Unit. “Despite Kanodia’s attempts at concealment, the SEC staff was able to uncover and unravel the scheme.”
The SEC’s complaint alleges both Kanodia and Ahmed with violating federal anti-fraud laws and an SEC anti-fraud rule. The third friend and the affiliated charity are named relief defendants for the purpose of recovering wrongful profits from the insider trading.
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