Trading Group Busted for Profiting on Confidential Fortinet, Infinera Information

A Silicon Valley trading ring has been charged with insider trading for generating nearly $1.7 million in illegal profits based on confidential earnings information of Fortinet and Infinera.

The Securities and Exchange Commission (SEC) announced the charges against the group, which also avoided losses by trading on the confidential information.

Nathaniel Brown was senior revenue manager in Infinera’s finance organization from 2011-2017. According to the SEC’s complaint, he repeatedly tipped Infinera’s unannounced quarterly earnings and financial performance to his best friend, Benjamin Wylam. He did this from April 2016 until when he left the company in November 2017.

The SEC’s complaint alleges Wylam, a high school teacher and bookmaker, traded on this information and also tipped Naveen Sood, who owed Wylam a six-figure gambling debt. Sood allegedly traded on this information and tipped his three friends Marcus Bannon, Matthew Rauch and Naresh Ramaiya, each of whom also illegally traded on the information.

Fortinet Financials

According to his LinkedIn page, Bannon is a global account manager at Fortinet. The SEC’s complaint alleges he tipped Sood with material, nonpublic information concerning Fortinet.  Bannon allegedly learned in early October 2016 that Fortinet was going to unexpectedly announce preliminary negative financial results. He then supposedly tipped this information to Sood, who used it to trade. The SEC says after learning the information, Sood tipped Wylam and Ramaiya, who also traded.

Joseph Sansone is chief of the SEC enforcement division’s market abuse unit.

SEC’s Joseph Sansone

“Using sophisticated data analysis, the SEC was able to uncover this insider trading ring and hold each of its participants accountable to ensure the integrity of our markets,” he said. “The Commission considered relevant circumstances, including Bannon’s medical condition, in accepting these defendants’ settlement offers in order to address the concerted misconduct alleged in our complaint, which involved insider trading in the securities of two different companies for more than a year.”

SEC Charges

The SEC’s complaint charges Brown, Wylam, Sood, Bannon, Rauch and Ramaiya with violating the Securities Exchange Act of 1934. Bannon, Rauch, and Ramaiya consented to the entry of final judgments without admitting or denying the allegations in the complaint.

Bannon agreed to pay a civil penalty of more than $281,000. Rauch is paying more than $128,000 and Ramaiya is coughing up nearly $66,000.

Sood also consented to the entry of a final judgment and agreed to pay a penalty of more than $178,000. The final judgments, which require court approval, would permanently enjoin Bannon, Rauch, Ramaiya and Sood from violating the Securities Exchange Act.  Wylam has consented to a permanent injunction with civil penalties, if any, to be decided later by the court.

The SEC’s litigation against Brown continues.

In parallel proceedings, the U.S. Attorney’s Office for the Northern District of California announced related criminal charges against Brown, Wylam and Sood. Sood has pleaded guilty to one count of securities fraud.