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A former UBS Group AG compliance officer was charged by U.K. regulators with passing tips on five occasions to a London man who traded on the information, according to court records.

Fabiana Abdel-Malek, 34, and Walid Choucair, 38, were each charged with five counts of insider dealing between June 2013 and June 2014, a court clerk said by phone Wednesday, reading charges filed by the Financial Conduct Authority. Abdel-Malek, who has a law degree, had worked as a compliance officer at UBS since 2007, according to her LinkedIn profile, where her surname is listed as Malek.



The Securities Appellate Tribunal (SAT) today admitted Reliance Industries’ (RIL) appeal against a ban on trading in the equity derivatives market for a year imposed by the Securities and Exchange Board of India.

In March, SEBI had ordered RIL to give up the Rs. 447.27 crore of illegal gains it made through the network on trades in 2007 and pay an additional penal interest of 12 per cent per annum from November 29, 2007. RIL and the 12 front entities are also banned from accessing the equity derivatives market for a year.

Counsel for Reliance Industries Harish Salve appealed against the SEBI order at SAT. The next hearing in the case has been posted for early August.

Meanwhile, Salve asked SAT to allow RIL to continue to invest the company’s surplus cash in mutual funds. Some of these funds, he argued, may trade in equity derivatives and this should not be construed as going against the SEBI order.

In its response, counsel for SEBI asked RIL to submit an application to the regulator in this regard with the names of the fund houses that RIL invests in.

Salve added that the company does not have any current F&O positions in equity.

In March, SEBI, under its new chief Ajay Tyagi, had found Reliance Industries guilty of unfair trade practices and “perpetrating fraud in the securities market”, which resulted in “illegal gains” for the company.

The case dates back to March 2007 when the Mukesh Ambani-led Reliance Industries decided to sell five per cent stake in a subsidiary listed company Reliance Petroleum.

However, instead of directly selling shares in the cash market and risking a fall in the price, RIL chose to bet against its subsidiary’s shares in the derivatives market through 12 front entities, according to SEBI’s investigations.

These front entities executed trades in the cash market below the last traded price of the stock, hence triggering a fall in the share price of Reliance Petroleum. This fall in share price allowed them to profit from their own short positions in the derivatives segment to the tune of Rs. 447.27 crore, SEBI found.

According to SEBI’s findings, RIL made illegal gains of Rs. 60.28 a share on 7.42 crore shares.

Reliance Petroleum had merged with RIL in 2009.

A former Expedia computer support technician was sentenced to 15 months in prison on Tuesday after admitting he stole confidential information from senior executives’ emails to profit from insider trading.

Jonathan Ly, 28, was sentenced by U.S. District Judge John Coughenour in Seattle after pleading guilty in December to a securities fraud charge for having engaged in an insider trading scheme that prosecutors said netted him $331,000.

As part of a plea deal, Ly had also agreed to repay Expedia the $81,592 it spent investigating the computer intrusion. He previously reached a $375,907 settlement with the U.S. Securities and Exchange Commission.

Prosecutors had sought a two-year prison sentence for Ly, a resident of San Francisco, according to court papers. A lawyer for Ly, John Runfola, said he was grateful for the 15-month term the judge imposed.

According to court papers, in 2013, Ly began exploiting his administrative access privileges to secretly review the contents of devices belonging to executives including Expedia’s chief financial officer and head of investor relations.

Prosecutors said that using the non-public information he obtained, Ly executed a series of well-timed trades in Expedia stock options.



NEW YORK: A 41-year-old Indian citizen has been arrested on charges of insider tradingand making thousands of dollars using confidential information of a private equity firm’s acquisition of a technology company.

Avaneesh Krishnamoorthy, who lives in New Jersey, served as a vice president and risk management specialist for a Manhattan-based investment bank from 2015 till this month.

He is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million.

Acting Manhattan US Attorney Joon Kim said Krishnamoorthy made approximately $48,000 in illicit profits through the insider trading scheme.

The Securities and Exchange Commission filed a parallel civil complaint alleging that the accused learned that Golden Gate Capital planned to acquire publicly traded advertising technology company Neustar Inc.

He then began trading in Neustar securities. The trading took place in two brokerage accounts that Krishnamoorthy allegedly kept hidden from his employer, which had been approached by Golden Gate Capital to finance the transaction.

Krishnamoorthy was presented in Manhattan federal court before United States Magistrate judge Kevin Nathaniel Fox on Tuesday.

Kim said Krishnamoorthy has been charged with violating his duty to his company and trading on insider information.

“He allegedly exploited his access to information about a pending acquisition to purchase stock and options, making tens of thousands of dollars in illegal profit for himself,” the attorney said.

The insider trading case is among the first brought by Kim, who succeeded Preet Bharara, Manhattan’s top federal prosecutor after he was fired by the Trump administration.

Bharara had successfully prosecuted several high profile insider trading cases, including those against India-born Rajat Gupta and his one time friend and business associate Raj Rajaratnam.

According to the complaint filed in Manhattan federal court, as vice president and risk management specialist, Krishnamoorthy had access to material non-public information concerning mergers and acquisitions for which the investment bank he worked in might potentially provide financing



Reliance Industries

Reliance Industries has been asked to disgorge Rs 447 crore, along with an annual interest of 12 per cent since November 29, 2007, which itself would be more than Rs 500 crore, taking the total disgorgement amount to nearly Rs 1,000 crore.
SEBI banned Reliance Industries and 12 others from equity derivatives trading for one year.
The case is related to alleged fraudulent trading in the F&O space.
The Mukesh Ambani-led firm has been directed to disgorge nearly Rs 1,000 crore.

Securities and Exchange Board of India (SEBI) today banned Reliance Industries and 12 others from equity derivatives trading for one year and directed the Mukesh Ambani-led firm to disgorge nearly Rs 1,000 crore for alleged fraudulent trading in a 10-year-old case.

A company spokesperson said it will challenge the order. Reliance Industries has been asked to disgorge Rs 447 crore, along with an annual interest of 12 per cent since November 29, 2007, which itself would be more than Rs 500 crore, taking the total disgorgement amount to nearly Rs 1,000 crore.

The case related to alleged fraudulent trading in the F&O space in the securities of RILs erstwhile listed subsidiary Reliance Petroleum.

In a 54-page order passed by Whole-Time Member G Mahalingam, RIL and 12 other entities have been prohibited from dealing in the “equity derivatives in the F&O segment of stock exchanges, directly or indirectly”.


The ban will be in place for one year from today. The 12 other entities are Gujarat Petcoke and Petro Product supply, Aarthik Commercials, LPG Infrastructure India, Relpol Plastic Products, Fine Tech Commercials, Pipeline Infrastructure India, Motech software, Darshan Securities, Relogistics (India), Relogistics (Rajasthan), Vinamara Universal Traders and Dharti Investment and Holdings. Reliance Industries has been directed to disgorge the amount, along with interest within 45 days.

Mahalingam said the directions are being passed after taking into consideration the magnitude of the fraud across the markets. “I am inclined to pass certain directions against the noticees in order to protect the interest of the investors and reinstil their faith in the regulatory system,” the order said. “The noticees may, however, square off or close out their existing open positions.”

The Reliance Industries group had earlier sought to settle the case, but SEBI had refused. The proceedings in the long-pending case were expedited in the last few months. Reliance Petroleum has been merged with the listed parent firm.

Meanwhile, Reliance Industries issued a statement with regards to the matter and has said that SEBI had imposed unjustifiable sanctions.

In an order issued today, market regulator Securities and Exchange Board of India (SEBI) barred Reliance Industries Limited from trading in equity derivative Future & Options markers for one year in RPL case.

SEBI also ordered ordered RIL to pay Rs 447 crore plus interest as fine within 45 days in a seven-year-long insider trading case. SEBI said the company had made unlawful gains of Rs 513 crore.

SEBI has also issued showcause notices to 13 companies on Reliance Petroleum case.

The SEBI order says:

Under Sections 11, 11B of the SEBI Act, 1992, Section 12A of the Securities Contracts (Regulation) Act, 1956 read with Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003

In the case of Reliance Petroleum Ltd. (RPL) –


1. Reliance Industries Ltd. (PAN No. AAACR5055K)

2. Gujarat Petcoke and Petro Product supply Pvt. Ltd. (PAN No. AABCG9773E)

3. Aarthik Commercials Pvt. Limited. (PAN No. AACCR0191A)

4. LPG Infrastructure India Pvt. Limited. PAN No. AAACL7928F)

5. Relpol Plastic Products Pvt. Limited. (PAN No. AAACN6007D)

6. Fine Tech Commercials Pvt. Limited. (PAN No. AAACF5232A)

7. Pipeline Infrastructure India Pvt. Limited. (PAN No. AABCD2718F, AABCD2719F)

8. Motech software Pvt. Limited. (PAN No. AACCM0039Q)

9. Darshan Securities Pvt. Limited. (PAN No. AAACD1408Q)

10. Relogistics (India) Pvt. Limited. (PAN No. AACCR3050J)

11. Relogistics (Rajasthan) Pvt. Limited. (PAN No. AAACZ1853B)

12. Vinamara Universal Traders Pvt. Limited. (PAN No. AACCV5090J)

13. Dharti Investment and Holdings Pvt. Limited. (PAN No. AACCD2509C)

Directions :

In view of the above findings and taking into consideration the magnitude of the fraud across the markets; the quantum of unlawful gains made by the Noticee No. 1 (Reliance Industries Ltd ) and the role of the agents in facilitating the fraudulent design, I am inclined to pass certain directions against the noticees in order to protect the interest of the investors and re-instill their faith in the regulatory system.

Accordingly, in exercise of the powers conferred upon me under section 19 of the SEBI Act, 1992 read with sections 11 and 11B of the SEBI Act, and Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 2003, I hereby pass the following directions:-

(i) The noticees named above shall be prohibited from dealing in equity derivatives in the F&O segment of stock exchanges, directly or indirectly, for a period of one year from the date of this order. The noticees may however square off or close out their existing open positions.

(ii) Noticee No. 1 shall disgorge an amount of ? 447.27 crores, as ascertained in para No. 5.5 above along with interest calculated at the rate of 12% per annum from 29 November, 2007 onwards, till the date of payment.

(iii) Noticee No. 1 shall pay the said amounts within 45 days from the date of this Order either by way of demand draft drawn in favour of “Securities and Exchange Board of India”, payable at Mumbai or by e-payment* to SEBI account


Over the course of a few evenings in 2013, the heads of trading from major investment banks got together for some poker nights. It was a bit of relaxation from their hectic schedules. But what their seemingly-innocent hands of Texas Hold’em revealed was a story of traders gone rogue.

After every poker night, there would be a big spike in the profit and loss (P&L) statement for the traders involved because they would be colluding and tipping each other off about trades.

But it wasn’t until 2015 that this was discovered when the companies were under investigation by authorities. A law firm brought in to look into the suspicious activity was handed piles of communications documents, but it was artificial intelligence (AI) software that managed to find the link between poker nights and the collusion that had taken place.

It can be hard for investigators to draw conclusions from the mass of documents they have to wade through. How can you connect a private poker night to illegal trading? Behavox is a U.K. start-up that uncovered the wrongdoing. Its software can link seemingly unrelated things to help compliance staff within financial organizations find rogue traders, by recognizing behavior that strays from the norm.

“A poker night would have never got flagged as you didn’t know you should be looking at it as something suspicious,” Erkin Adylov, chief executive of Behavox, told CNBC in an interview.

“The relationship between the people involved is the reason we flagged it. The three people who kept playing poker were very close and seem important, i.e. there seemed like there was a business relation. The fact that these guys spent a ton of time playing poker when they were clearly busy was the first thing we highlighted. When you analyzed P&L and overlaid one data set with another, there was a big spike in P&L after the poker night. When we highlighted, the compliance guys were able to connect the dots and found it was a case of collusion.”

Behavox uses machine learning – where its algorithm continues to improve with more data – to analyze employees within an organization. It allows the software to build up a picture of workers and then flag anything that appears out of character. It could be something as granular as using an obscene word in a message to a colleague, to the way you speak to people on the trading floor. The current problem is that compliance officers and investigators could have to sift through millions of documents of message logs or financial statements and not necessarily draw a link between them.

The start-up is trying to build up a database of past misconduct in order to help financial institutions deal with bad behavior, something that can be challenging because companies don’t want to give others an insight into wrongdoings within.

“One of our biggest problems when we were starting out was the fact that you can’t build software unless somebody gives you the data set. And nobody is going to give you the data set until you actually have the software, so it’s a chicken and egg situation,” Adylov said.

However, law firms brought in to investigate are “playing defense” and are happy to give data to Behavox to help, the entrepreneur said.

It’s a solution that should be welcome to many large businesses given that the banking sector has been hit with billions of dollars of fines over the last few years with the whole industry in the crosshairs of regulators. In the U.K., senior managers could face jail time if their employees make bad decisions which leads to the failure of a bank. Behavox is hoping it can win clients by explaining the need to know what’s going on within a business.

So far, hedge fund Marshall Wace and interdealer broker TP ICAP are using the software. Adylov said Behavox has 15 clients in total and is hoping that number will “escalate dramatically” this year. Last year, Behavox raised $3 million from a round of funding from London-based venture capital firm Hoxton Ventures and Chicago’s Promus Ventures. Adylov would not reveal the company’s valuation but said it is already getting takeover offers “north of $100 million”, after being in business for just two-and-a-half years.

The poker story is just one of many interesting examples Behavox’s software had found. Another involved traders using menu items from popular food chain Nando’s in the U.K. to hide illegal trading activity.

A potential challenge to the business could come from the U.S. where President Donald Trump has talked about deregulation of the banking sector including a repeal of the Dodd-Frank law which came into effect to stop another financial crisis. But Adylov said Trump is unlikely to do anything that would make insider trading legal for example, but instead would slow down the introduction of regulation so banks could catch up. In this instance, companies would still need Behavox, the founder said.



Steven Cohen, the former chairman of SAC Capital Advisors, is one of the most successful and notorious traders in Wall Street history. He made tens of millions of dollars trading stocks, and his firm was also the subject of a wide-reaching fraud investigation by the U.S. government for insider trading.

The Cohen story is the subject of “Black Edge,” a new nonfiction book by journalist Sheelah Kolhatkar, who joined MarketWatch for a Facebook Live interview. She discussed the Cohen case and insider trading in general, what this sort of crime means for ordinary investors, and what the outlook for fighting such crimes looks like under the Donald Trump administration. Watch the full interview here:




A former Wall Street investment banker was sentenced to 3 years in prison last week after he was convicted on insider trading charges related to a quintet of medical device and life science acquisitions.

Sean Stewart, who worked at Perella Weinberg Partners and JPMorgan Chase, was found guilty in New York City on all of the 9 counts he faced, including securities fraud. Judge Laura Taylor Swain of the U.S. District Court for Southern New York imposed the sentence after prosecutors asked for up to 6-1/2 years in prison.

Prosecutors accused him of passing information on the deals to his father, Robert Stewart, and a 3rd man. The elder Stewart, who pleaded guilty in 2015, was sentenced in May 2016 to a year of home confinement, 3 years of probation, 750 hours of community service and the forfeiture of $150,000 gained from the illicit trading. The 3rd man, ex-Chatsworth Securities investment banker Richard Cunniffe (whom prosecutors said kept most of the $1.16 million in illicit profits), secretly pleaded guilty in March 2015 and agreed to cooperate with authorities.

Sean Stewart had blamed his father for the charges, saying the elder man lied to him about the insider trading and claiming through his lawyer that he’d never even met Cunniffe.

“I never gave my father information so he could trade on it,” Sean Stewart testified.

The deals in question

Prosecutors alleged that Stewart 1st tipped his father to the $232 million acquisition of contract research organization Kendle International Inc. by INC Research in 2011, when the younger Stewart was advising Kendle. The elder Stewart made about $7,900 on illicit trading in Kendle stock, they alleged. When questioned, the father said he spent the money on his son’s wedding in June 2011, prosecutors said.

Apax Partners and a pair of Canadian pension funds agreed to acquire Kinetic Concepts Inc. for $6.3 billion in July 2011; Robert Stewart soon began trading in KCI shares based on a tip from the son, but allegedly worried that he was “too close to the source” of insider info on the $6.1 billion deal. Authorities said Robert Stewart then asked Chatsworth Securities investment banker Cunniffe to make the KCI trades for him; those trades brought in some $108,000 for the Stewarts, according to prosecutors.

Sean Stewart left JP Morgan in October 2011 to become a managing director at Perella Weinberg, where he allegedly learned of a trio of big medtech deals: Hologic‘s (NSDQ:HOLX) $3.7 billion buyout of Gen-Probe in 2012; the $3.8 billion acquisition of Lincare by Linde AG that same year; and 2015’s $12.2 billion union of Becton Dickinson (NYSE:BDX) and CareFusion, the prosecutors said.

Material from Reuters was used in this report.



Insider trading in the Dark Web is expanding, with new recruits being sourced from banks and financial institutions keen to make money from privileged access and knowledge.

According to cybersecurity firm RedOwl and Intsights’ newly-released report on insider trading, a number of marketplaces have sprung up which focus purely on insider trading as a way to manipulate the stock market, sell access to corporate systems and resources, and trade leaked information.

Forum discussions around insider trading nearly doubled from 2015 to 2016, with close to a thousand references being noted by researchers by the end of the year.

“The dark web has created a marketplace with ready buyers and collaborators that enables monetization of insider actions,” the researchers say. “Namely, the dark web catalyzes malicious insider activity by facilitating the ability to cash out with diminished risk of detection.”

Marketplace administrators take care to keep their activities as quiet as possible by hosting their websites overseas, keeping no logs, and using secure operating systems, according to RedOwl.

Membership is also a right of passage for many, with administrators keen to admit only those that have something worthwhile to offer.

One exclusive forum, called “Kick Ass Marketplace,” does not let new members join unless they prove they have access to privileged information — and then charges a membership fee of $820.

According to the forum’s creator, there are members of the club which make more than $5,000 a month by trading leaked data such as stolen credit cards.

Stock market trading, Forex trading, “knowing what is happening before the rest” news exchanges and commodity sales all take place in the forum. Over the past two years, the researchers have monitored roughly five posts a week and over $32,000 in transactions, all of which are made in Bitcoin.

In another forum, “The Stock Insiders,” the administrator claims to be “a former successful IT entrepreneur [..] also an active trader and has inside access to several publicly traded companies.”

Would-be insider traders are also given the tools to get the job done. In some cases, administrators provide users with malware samples so insiders in the financial industry can quickly gather the information they want without any need for specialized knowledge.

In addition, the researchers say that the Dark Web forums are giving insiders the chance to collaborate with skilled cyberattackers to conduct attacks.

In one case, for example, a cyberattacker offered to pay an insider a weekly wage to infect systems with malware and maintain access to a bank’s internal systems on their behalf.

This trend is bad news for businesses that may have strong perimeter defense but have no plans in place for when malware is loaded internally.

RedOwl says that risk management teams need to actively build insider threat programs and not just focus on external threats to their systems and data. The company says that while 80 percent of security initiatives focus on perimeter defense, fewer than half of organizations spend anything at all on insider threat protection.

It is up to businesses to tighten up their access controls, educate and train staff and maintain vigilant against insider threats. But the human element is always unpredictable and so the risk associated with insider trading can only ever be mitigated, not eradicated.


A Boston-based real estate entrepreneur was convicted on Monday of engaging in insider trading with two friends after learning of India-based Apollo Tyres Ltd’s planned attempt to buy Cooper Tire & Rubber Co in 2013.

Amit Kanodia, 49, was found guilty by a federal jury in Boston on 11 of the 19 counts he faced, including conspiracy and securities fraud. He was acquitted of the other eight counts of securities fraud, prosecutors said.

The verdict was confirmed by a spokeswoman for the U.S. Attorney’s Office in Boston. Kanodia, who had pleaded not guilty, is scheduled to be sentenced on Jan. 18.

Kanodia’s lawyers did not respond to requests for comment.

Prosecutors said Kanodia, of Brookline, Massachusetts, learned details about the proposed merger between Apollo and Cooper Tire from his then-wife, who was Apollo’s chief legal officer, more than two months before the deal was announced.

Prosecutors said Kanodia tipped off two of his friends, including Iftikar Ahmed, a general partner of Greenwich, Connecticut-based Oak Investment Partners.

Prosecutors said Ahmed and the other friend, Steven Watson, traded on the confidential information before the deal was announced and shared about $245,000 of their more than $1.17 million in illegal proceeds with Kanodia.Z

Those payments were made to an account Kanodia opened for a charity, Lincoln Charitable Foundation, ostensibly to raise money for flood victims in India, even though he used much of the money for his own financial investments, prosecutors said.

The merger was abandoned in December 2013 after an acrimonious legal battle between Apollo and Cooper Tire.

Both Kanodia and Ahmed were charged in connection with the insider trading scheme in April 2015, and Watson pleaded guilty that August as part of a cooperation deal with prosecutors.

Ahmed fled the United States for India in May 2015. Prosecutors have since separately accused him of embezzling $54 million from Oak Investment Partners.

The case is U.S. v. Kanodia et al, U.S. District Court, District of Massachusetts, No. 15-cr-10131. (Reporting by Nate Raymond in New York; Editing by Richard Chang)


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