Prosecutors, and perhaps the SEC, received a set back last in their war on insider trading as former J.P. Morgan Securities LLC analyst Ashish Aggarwal was found not guilty on 26 counts based on an insider trading scheme. The jury hung on four other counts. U.S. v. Aggarwal, Case No. 2:15-cr-00465 (C.D. Cal.); see also SEC v. Aggarwal, Civil Action No. 2:15-cv-06460 (C.D. Cal. Filed August 25, 2015)
Ashish Aggarwal worked in the Technology, Media & Telecommunications Group in the investment banking section of J.P. Morgan’s San Francisco office. His friend, defendant Shahriyar Bolandian, worked for an e-commerce company founded by Kevan Sadigh, also a defendant.
Messrs. Aggarwal and Bolandian had been close friends since they were undergraduate students at Berkley. Beginning at least in 2012 Mr. Bolandian, in consultation with his friend, conducted a series of securities trades in one or more accounts. Trading in this fashion permitted Mr. Aggarwal to circumvent the JPM pre-clearance rules regarding securities trading and potentially share in the profits. By March 2013, however, the two men suffered trading losses.
The charges here center on two deals. The first involved Integrated Device Technology, Inc. and PLX Technology, Inc. In early 2012 JPM was retained by Integrated Device, a provider of integrated circuits, with respect to the acquisition of PLX, a provider of integrated circuits that performed system connectivity functions. By mid-April the negotiations advanced. By April 15 a draft merger agreement had been prepared. At some point prior to the end of that month Mr. Aggarwal learned about the deal. He had access to information about it through a friend, Analyst 1.
On April 16, 2012 Mr. Bolandian bought 200 shares of PLXT stock and 30 call options. He and his friend, Mr. Aggarwal, had previously exchanged multiple text messages and spoke on the telephone. That same day Mr. Sadigh purchased 500 shares of PLXT stock and 30 call options. The pattern of purchases and text messages continued until the deal announcement after the close of the markets on April 30, 2012. Following the announcement the share price increased 97%. In May Messrs. Bolandian and Sadigh sold their interest in PLXT, yielding, respectively, gains of $36,200 and $41, 200.
The second deal involved ExactTarget, Inc., a provider of email and cloud marketing services, and salesforce.com, Inc., a provider of enterprise cloud computing services. In May 2013 ExactTarget retained JPM in connection with a possible merger. The JPM deal team included Analyst 2 and Analyst 3, both of whom were friends of Mr. Aggarwal. As with the PLX deal, Messrs. Aggarwal and Bolandian exchanged a number of text messages following the retention of JPM by ExactTarget. On May 8, 2013 Mr. Sadigh made his first purchase of ExactTarget securities. Mr. Bolandian wired additional cash to his brokerage account the same day. The next day he purchased 60 call options in ExactTarget. Mr. Sadigh bought 50 call options that day. The SEC complaint details multiple text messages and trading by the two men prior to the deal announcement on June 4, 2013 before the opening of the market. Following the announcement the share price increased by 50%. Mr. Bolandian’s accounts had profits of about $317,000. Mr. Sadigh had profits of about $178,000.
The jury hung on the counts involving the ExactTarget deal. The government has not announced if it will seek a retrial. The SEC’s case is pending.