REGIONAL – Two Tri-Valley men have been arrested on multiple counts of insider trading that generated more than $5.2 million in illegal profits, according to federal authorities. A third man from Fremont has also been charged.
Srinivasa Kakkera, 47, of Pleasanton and Amit Bhardwaj, 49, of San Ramon, along with Abbas Saeedi, 47 of Fremont, were arrested July 25 on varying counts of securities fraud, wire fraud and conspiracy charges. Bhardwaj, who was chief information security officer for Lumentum Holdings, an optical and photonic products company based in San Jose, faces up to 190 years in prison. Kakkera, head of engineering and artificial intelligence at a publicly-traded computer software company in San Jose; and Saeedi, who owns a tax preparation firm in Newark, each face up to 50 years behind bars.
“Insider trading erodes the trust and confidence of the investing public in our capital markets,” Damian Williams, U.S. Attorney for the Southern District of New York said in a statement. “We will continue to investigate and prosecute those who cheat in the markets by using insider information to line their own pockets.”
Bhardwaj allegedly tipped off Kakkera and Saeedi to secret information he gleaned on the job so they could purchase security bonds.
In addition to the criminal charges filed in the U.S. District Court in Manhattan, the Securities and Exchange Commission filed civil action against the men, seeking repayment of the ill-gotten gains. The SEC complaint also names Ramesh Chitor, 45, of Fremont and Dhirenkumar Patel, 50, of Newark as civil defendants.
According to the 20-page criminal indictment, sometime in December 2020, Bhardwaj learned that Lumentum was considering buying Coherent, a Santa Clara-based laser company. The information was not in the public domain.
Prosecutors allege Bhardwaj made use of the secret information and purchased Coherent stock and call options. He tipped friends, including Patel, to do the same. Patel, in turn, agreed to pay Bhardwaj 50% of whatever profit he made, the federal documents allege.
The men purchased thousands of shares of Coherent before Lumentum and Coherent signed a merger agreement on Jan. 18, 2021. The cash and stock transaction was valued at $5.7 billion.
Following the public announcement of the transaction the next day, the price of Coherent stock rose to $197 per share, a nearly 30% increase from its closing price the day before.
“When Coherent’s stock price increased substantially following the Jan. 19,2021, announcement, Amit Bhadrwaj, his close family member, his friend Patel, and another friend, closed their positions in Coherent Securities and collectively profited by nearly $900,000,” the U.S. Attorney's Office said.
In October 2021, after learning that Lumentum again was engaged in confidential discussions to buy San Jose photonics developer Neophotonics, Bhardwaj told Kakkera, Saeedi and Chitor, the complaint said. Each man then traded in Neophotonics securities.
According to the SEC complaint, Kakkera bought 82,150 shares of NeoPhotonics stock and 47,200 more shares in the name of the Kakkera Trust.
“In total, Kakkera and the Kakkera Trust paid approximately $1.66 million to purchase both NeoPhotonics shares and call options,” the SEC said. “Following the NeoPhotonics announcement, Kakkera and the Kakkera Trust gained a total of approximately $2.45 million in illicit profits.”
Together, prosecutors allege, Kakkera, Saeedi and Chitor made about $4.3 million in realized and unrealized profits.
The FBI and SEC opened investigations. The indictment alleges that after the men were served with federal grand jury subpoenas on March 29, Bhardwaj drove to the other men’s homes to encourage them to lie. In addition, federal authorities allege Bhardwaj, Kakkera, Saeedi and Patel met on multiple occasions to discuss false stories and the creation of phony documents to conceal their insider trading scheme.
The SEC complaint also seeks restitution from Bharwaj’s wife, Gauri Salwan; the Kakkera Family Trust; Saeedi’s wife, Janya; and All US Tacos, a company operated by the Saeedis.
