Two Indian-American doctors among six persons have been charged by the federal regulator in an insider trading scheme, where they reaped nearly $300,000 from confidential information.

Suken Shah and his brother Shimul Shah received confidential tips from Christopher Saridakis, CEO of GSI Commerce, an e-commerce company, about its proposed acquisition by eBay in March 2011.

The Securities and Exchange Commission has alleged that Saridakis tipped his friend Suken Shah, a Delaware-based doctor with non-public information about the deal, following a meeting with eBay executives. Shah earned insider trading profits of $9,838 and provided the non-public information to his brother and another individual.

Disgorgement, trading profits

Shah has agreed to settle the SEC’s charges in an administrative proceeding by paying disgorgement of $10,446, which includes $609 in trading profits made by the other individual he tipped.

He has also agreed to pay prejudgment interest of $1,007 and a penalty of $64,965 for $76,418. Shah’s penalty is three times the amount of his and his tippees’ trading profits.

In a separate settled administrative proceeding, the SEC has charged Shimul Shah, a doctor who now resides in Cincinnati, with insider trading on the non-public information he received from his brother. Besides trading himself, Shah has tipped others with the non-public information during a group dinner he attended with several friends from his medical residency.

Prejudgment interest, trading profit

To settle the SEC’s charges, Shah has agreed to disgorge his trading profit of $11,209 and pay prejudgment interest of $1,022 and a penalty of $22,418 for $34,650. Shah’s penalty is twice the amount of his trading profit.

The individual who entered the non-prosecution agreement was tipped by Shah at the group dinner. This individual has agreed to disgorge a trading profit of $31,777 and pay $2,725 in prejudgment interest for $ 34,502.

The SEC has alleged that Saridakis violated his duty of trust as CEO of the marketing solutions division of GSI Commerce by providing the non-public information about the pending acquisition to his friends and encouraging them to trade on it.

In settling the SEC’s charges, Saridakis has agreed to an officer-and-director bar and must pay $664,822, which includes a penalty equal to twice the amount of his tippees’ profits.

The five traders, including the Shahs, would pay a combined total of over $4,90,000 in their settlements, which range from disgorgement-only or reduced penalties for cooperators to penalties of two or three times the trading profits for other traders.

(This article was published on April 26, 2014)
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