Samir Barai charged for insider trading
SUMAN GUHA MOZUMDER
American capital markets system. ‘Everyone is
expected to play by a single, uniform set of
rules. That basic principle gives investors confidence that the markets are fair and the playing
field is level. Insider trading corrodes that
investor confidence,’ he said.
In its initial complaint, Barai had been
charged with one count of conspiracy to commit securities fraud and wire fraud, one count
of obstruction of justice, and three counts of
substantive securities fraud. In that complaint,
the SEC said that count one carried a maximum
penalty of five years in prison and a fine of
$250,000, or twice the gross gain or loss from
the offense, while counts two through four carried a maximum penalty of 20 years in prison
and a maximum fine of $5 million. Counts five
and six carried a maximum potential penalty of
20 years in prison and a fine of $250,000, or
twice the gross gain or loss from the offense.
He surrendered to federal authorities
February 8, before Manhattan United States
Attorney Preet Bharara unsealed the SEC complaint.
The case was brought in coordination with President
Barack Obama’s Financial Fraud task Force, on which
Bharara serves as a co-chair of the Securities and
Commodities Fraud Group. Among others who investigated the alleged fraud was Sanjay Wadhwa, a member of the
SEC’s market abuse unit in New York.
The SEC’s ongoing investigation is focusing on the activities of expert networks that purportedly provide professional investment research to clients.
The Securities and Exchange Commission last week
charged a New York-based hedge fund and four portfolio managers and analysts, including an Indian
American, with illegally trading confidential information obtained from technology company employees
moonlighting as expert network consultants.
The scheme netted more than $30 million from
trades based on material, nonpublic information
about companies, including AMD, Seagate
Technology, Western Digital, Fairchild Semiconductor
Samir Barai, 39, of New York, founder and portfolio
manager, Barai Capital Management, allegedly
obtained inside information about several technology
firms from company insiders, and traded on the inside
information on behalf of Barai Capital.
The amended complaint filed February 8 in the
Manhattan federal court are the first against traders in
the SEC’s ongoing investigation of insider trading
involving expert networks and technology company
employees who illegally tipped hedge funds and other
investors with nonpublic information in return for
thousands of dollars in sham consulting fees.
The others who were charged included Jason Pflaum of
New York, a former technology analyst at Barai Capital
Management who obtained inside information about technology companies and shared it with Barai. The amended
complaint against Barai, Pflaum and Barai Capital sought
a final judgment permanently enjoining the defendants
from future violations of the federal securities laws, and
ordering them ‘to disgorge their ill-gotten gains’ plus pre-
US Attorney Preet Bharara describes insider trading charges against Samir Barai and three
others in New York, February 8
judgment interest, and ordering them to pay financial
‘It is illegal for company insiders who moonlight as consultants to sell confidential information about their companies to traders, and it is equally illegal to buy that corruptly obtained information and trade on it,’ said Robert
Khuzami, director, division of enforcement, SEC.
At a press conference in Washington, he said these corrupt arrangements violated a basic principle of the
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PARIVARTAN SHARMA/REU TERS
A worker shines cricket balls at a factory in
Meerut, Uttar Pradesh, January 31, as
cricket equipment makers race to meet a
demand surge ahead of the cricket World
Cup, which starts February 19