Two longtime friends who illegally profited from insider trading on news of a proposed acquisition of Cooper Tire and Rubber Company by Apollo Tyres Ltd., according to a release on Friday from the SEC.
In a complaint filed in US district court in Connecticut, the SEC filed fraud charges against Iftikar Ahmed, of Greenwich, a general partner at a venture capital firm, and Amit Kanodia, of Brookline, Massachusetts, an entrepreneur and private equity investor.
The SEC 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 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, the complaint alleges.
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, the SEC’s complaint further alleges.
“We allege that Kanodia gave inside information to two close friends who then kicked back a portion of their insider trading profits to a supposed charity that Kanodia controlled,” said Joseph G. Sansone, Co-Deputy Chief of the SEC Enforcement Division’s Market Abuse Unit. “Despite Kanodia’s attempts at concealment, the SEC staff was able to uncover and unravel the scheme.”
The SEC’s complaint charges Kanodia and Ahmed with violating federal anti-fraud laws and a related SEC ant-fraud rule. Rakitfi Holdings and Lincoln Charitable Foundation are named as relief defendants in the SEC’s complaint for the purpose of recovering ill-gotten gains from the trading.
The SEC’s investigation, which is continuing, has been conducted by Jay A. Scoggins and Jeffrey E. Oraker of the Market Abuse Unit in the Denver Regional Office with assistance from Patrick A. McCluskey of the Market Abuse Unit in the Philadelphia Regional Office. The case has been supervised by Daniel M. Hawke, Chief of the Market Abuse Unit, and Mr. Sansone, and the litigation will be led by Nicholas P. Heinke and Mark L. Williams of the Denver Regional Office. The SEC appreciates the assistance of the U.S. Attorney’s Office in Boston, the U.S. Attorney’s Office in Connecticut, the Federal Bureau of Investigations, and FINRA, the Financial Industry Regulatory Authority.