Two Indian Americans charged with $1.1 mn fraud
Washington: Two Indian American long-time friends have been charged with making over $1.1 million in illegal profits from insider trading on news of a proposed acquisition of Cooper Tire and Rubber Company by India-based Apollo Tyres Ltd.
In a complaint filed in a US district court in Connecticut on Thursday, US market regulator charged Massachusetts private equity investor Amit Kanodia, and Iftikar Ahmed, a general partner at a venture capital firm in Connecticut, with fraud.
The Securities and Exchange Commission (SEC) named Rakitfi Holdings LLC, a company owned by Ahmed, and Lincoln Charitable Foundation, a supposed charity operated by Kanodia, as relief defendants, according to an SEC release.
The SEC is seeking to have the duo return their allegedly ill-gotten gains with interest and pay civil monetary penalties.
The US Attorney’s Office for the District of Massachusetts announced parallel criminal charges against Kanodia and Ahmed.
The SEC alleges that by April 2013, India-based Apollo Tyres was engaged in serious negotiations to acquire Cooper Tire, of Findlay, Ohio.
Although the acquisition was never completed, the complaint alleges that Cooper Tire’s stock price jumped 41 percent when the acquisition was announced in June 2013.
The SEC alleges that Kanodia tipped Ahmed and another friend prior to the acquisition announcement after learning of the deal from his wife, then the general counsel at Apollo who was intimately involved in Apollo’s efforts to acquire Cooper Tire.
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, SEC alleged.
A second close friend of Kanodia, identified in the complaint as Tippee 1, also profited by trading on the confidential information provided by Kanodia and paid a portion of his illicit gains to Kanodia using the same supposed charity, it further alleged.