New York/Washington, DC – A senior Indian American banker was arrested and presented on Monday (April 24) in a Manhattan federal court before United States Magistrate Judge Kevin Nathaniel Fox, according to a FBI statement.
Avaneesh Krishnamoorthy, who works as a vice president and risk management specialist for a Manhattan-based investment bank (the “Investment Bank”), was “arrested this morning and charged with insider trading,” said the FBI statement.
According to the FBI, Krishnamoorthy made approximately $48,000 in connection with stock and options trading based on material nonpublic information he misappropriated from the Investment Bank and its parent company (the “Company”), about a private equity fund’s potential acquisition of a publicly traded company.
Commenting on the case, FBI Assistant Director-in-Charge William F. Sweeney Jr. said, “When one has access to material nonpublic information, they are afforded significant knowledge that could give them a competitive edge in stock and options trading. But, as we all know, it’s illegal to use this information in furtherance of personal gain.”
“As alleged today, Krishnamoorthy ignored these rules, using the information at his fingertips to his advantage, and made personal profits in the tens of thousands. The FBI and our partners will continue to investigate and prosecute those who cheat the system in this way,” Sweeney Jr. added.
Earlier, the Securities and Exchange Commission (SEC) charged Krishnamoorthy with insider trading on confidential information he learned in advance of a private equity firm’s acquisition of a publicly-traded technology company.
“As alleged in our complaint, Krishnamoorthy was entrusted with confidential, market-moving information by his employer and he misused it for personal gain,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.
In a parallel action, the US Attorney’s Office for the Southern District of New York filed criminal charges against Krishnamoorthy.
Announcing the case against Krishnamoorthy, Joon H. Kim, the Acting United States Attorney for the Southern District of New York said, “Avaneesh Krishnamoorthy is charged with violating his duty to his company and trading on insider information. He allegedly exploited his access to information about a pending acquisition to purchase stock and options, making tens of thousands of dollars in illegal profit for himself. This Office remains committed to enforcing the nation’s securities laws to protect the fairness and integrity of the markets.”
According to the court documents, Krishnamoorthy used information available to him as a vice president and risk management specialist, including material nonpublic information concerning mergers and acquisitions for which the Investment Bank might potentially provide financing.
The documents allege that in November 2016, a private equity fund contacted the Investment Bank concerning financing for the Fund’s acquisition of Neustar, Inc. (“Neustar”), a publicly traded company whose shares trade on the New York Stock Exchange.
Learning about the deal from multiple emails regarding the Investment Bank’s potential involvement in the transaction, including emails that summarized the details of the deal, and in violation of the Company’s policies and in breach of his duties to the Company, Krishnamoorthy used this material nonpublic information to acquire Neustar stock and options.
In the days and weeks after receiving the emails, and prior to the public announcement of the Fund’s acquisition of Neustar, Krishnamoorthy purchased numerous Neustar call options and shares of Neustar stock in the names of both himself and his spouse.
Moreover, contrary to the policies of the Company, Krishnamoorthy did not reveal these trades or the existence of these brokerage accounts to the Company.
The public announcement of the Fund’s acquisition of Neustar on December 14, 2016, resulted in an approximately 20 percent increase in the value of Neustar stock in the hours following the announcement, resulting in a corresponding increase in the value of the call options and equity stock held by Krishnamoorthy and his spouse. As a result of the insider trading alleged in the complaint, Krishnamoorthy generated at least $48,000 in profits, according to the allegations in the court documents.
Krishnamoorthy is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.