Siblings Suken, Shimul Shah to pay financial penalties.
By Deepak Chitnis
WASHINGTON, DC: Two Indian Americans have been charged with insider trading, in connection to eBay’s acquisition of a smaller company back in 2011.
According to the Securities and Exchange Commission (SEC), brothers Suken and Shimul Shah received privileged information from Christopher Saridakis, the then-CEO of GSI Commerce, which allowed them to accrue tens of thousands of dollars in illicit profits between the two of them. GSI Commerce, an e-commerce firm based in the King of Prussia area just outside of Philadelphia, was acquired by eBay in 2011 for an undisclosed sum.
Wilmington, Delaware-based Suken Shah was tipped off by his friend, Saridakis, about the merger before it was publically announced on March 28, 2011. Sardakis knew as early as March 11 that his company was going to be acquired by the online sales giant, and tipped off Suken Shah and Jules Gardner, a former colleague residing in Villanova, Pennsylvania.
Shah, a physician, told his Cincinnati-based brother, Shimul Shah, about the impending acquisition, urging him to buy up stock in the company as shares would rise significantly once word about the eBay purchase was made public. Shimul Shah also tipped off several others, although their names have not been disclosed and there is no ongoing legal action against them.
Once GSI Commerce and eBay made the acquisition public, shares of the former rose by about 50%, creating large profits for shareholders who acquired the stock pre-acquisition. Suken Shah made close to $10,000 from the insider trading, while Shimul Shah just over $11,000.
“Saridakis chose to dole out confidential, market-moving information to enrich relatives and friends, and the nonpublic details then spread further through multiple levels of tippers and tippees,” said Scott Friestad, associate director of the SEC’s Division of Enforcement, in a statement. “The SEC thoroughly investigates suspicious trading to trace it to the source and pursue all those involved.”
As part of a plea deal with the courts, both brothers have agreed to fork over all of their illegally gained profits, as well as other penalties.
Suken Shah will pay a disgorgement sum of $10,446 (including $609 from trading profits made by those he may have tipped off), pre-judgment interest payment of $1,007, and a penalty of $64,964, equaling a total of $76,418 in restitutions. Shimul Shah will pay back $11,209 in disgorgement, $1,022 in pre-judgment interest, and a penalty of $22,418, for a total of $34,650.
Shimul Shah’s individual penalty payment is twice the amount of his trading profit, a measure instated because of others he may have told about the acquisition ahead of time.
A total of six men have been charged in connection with the insider trading case; in addition to Sardakis and the Shah brothers, Gardner, Oded Gabay, and Aharon Yehuda have also been roped in on similar charges.
Sardakis himself has agreed to pay $664,822 in damages, and has been barred from being an officer or director at any similarly sized firm. He is also facing criminal charges from the US Attorney’s Office for the Eastern District of Pennsylvania. Gardner will pay $259,054 in penalties, Gabay will pay a total of $46,999, and Yehuda will fork over $43,146.