Two men from Massachusetts and Connecticut have been charged in an insider trading scheme that prosecutors say netted more than $1 million.
Iftikar Ahmed, 44, of Greenwich, Connecticut, and hedge fund executive AmitKanodia, 47, of Brookline, Massachusetts, were charged with securities fraud Thursday in federal court in Boston.
The Securities and Exchange Commission named Rakitfi Holdings LLC, a company owned by Ahmed, and Lincoln Charitable Foundation, a supposed charity operated by Kanodia, as relief defendants. The SEC is seeking to have the defendants return their allegedly ill-gotten gains with interest and pay civil monetary penalties.
The U.S. attorney's office in Massachusetts also announced criminal charges against the two men, whom the SEC said are long-time friends.
Federal prosecutors said Kanodia tipped off Ahmed and another friend before April 2013 about the possible acquisition of Cooper Tire and Rubber Co., of Findlay, Ohio, by India-based Apollo Tyre. The Massachusetts U.S. attorney's office said that Kanodia learned about the possible acquisition from his wife, who was the general counsel of Apollo at the time.
Prosecutors allege that Ahmed and the unidentified friend bought Cooper Tire shares before the public announcement of the acquisition, then sold their interests for more than $1 million as Cooper Tire's share prices increased 41 percent after the announcement.
According to a press release from the SEC:
According to the SEC’s complaint, Kanodia shared the highly confidential information with Ahmed who began buying significant amounts of Cooper Tire stock and options. Once news of the deal was public, Ahmed immediately liquidated his Cooper Tire holdings, reaping more than $1.1 million of ill-gotten profits, according to the complaint. Ahmed later paid Kanodia a kickback by transferring $220,000 to Lincoln Charitable Foundation, a supposed charity that Kanodia controlled and used to mask the kickback, the complaint alleges.
A second close friend of Kanodia also profited by trading on the confidential information, according to the SEC.
“The defendants here are alleged to have improperly obtained confidential information from Apollo Tyre and used that information to unlawfully beat the markets and line their own pockets,” said U.S. Attorney Carmen Ortiz in a statement. “Trading on insider information is fraud, plain and simple.”
It's not clear if Ahmed and Kanodia have lawyers.
This report includes information from The Associated Press.
