Insider Trading Ring Has Over $1 Million in Profits
Insider trading has long been a staple of the Commission’s enforcement division. Over the years the agency has filed numerous actions alleging insider trading. Some actions were high profile and high risk such as the “suspicious trading” case, typically filed quickly after the trades in an effort to thwart the traders’ efforts to move the profits out of the grasp of the agency. Others were novel such as the early misappropriation cases when the theory was first introduced. Many are what might be called “routine” cases, assuming there is such a thing. The latest insider trading case filed by the Commission centers on a trading ring at one firm operated by company employees and trading by their friends. SEC v. Sure, Civil Action No. 3:22-cv-01967 (N.D. Cal. Filed March 28, 2022).
The action centers on trading formed in advance of the first quarter 2020 earnings release, published on May 6, 2020 of Twilio, Inc., a San Francisco based cloud computing communications firm. Three defendants were employed at Twilio: Hari Sure, Lokesh Lagudu and Chotu Pulagam. The three were friends. Each was employed as a software engineer at the company. Others named as defendants in the action are: Dileep Kamujula, Sai Nekkalapudi, Abhishek Dharmapurikar and Chetan Pulagam.
Between late March and early May the employee Defendants each obtained inside information regarding the firm’s revenue for the period by accessing Twilio data bases. Each either tipped friends or traded for their personal account as depicted below:
–Defendant Sure tipped Kamujula, a close friend
–Defendant Laguda tipped Nekkalapudi, his girlfriend
–Defendant Laguda also tipped Dhrmapurika, a former roommate
–Defendant Chotu Pulagam tipped Chetan Pulagam, his brother
–Defendant Kekkalapudi traded for his account
–Defendant Dharmapurikar traded for his own account
Essentially each tippe traded while the tipper did not; each Defendant who did not tip anyone traded profitably.
The trading ring netted over $1 million in illicit profits from trading Twilio securities prior to the announcement. The complaint alleges violations of Exchange Act Section 10(b). The U.S. Attorney’s Office for the Norther District of California announced criminal charges against Dileep Kamujula. See Lit. Rel. No. 25350 (March 29, 2022).