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DOJ Charges Congressman, FBI Agent Trainee, Tech Company Executives, And Investment Banker with Insider Trading.

An old Muslim proverb warns that the biggest threats come from inside.  A security professional’s nightmare is an insider with a motive, because such an insider has MOM: A motive, means and opportunity to commit a crime.  Despite staggering statistics around the number of security breaches within critical infrastructure, arguably the backbone of the global economy, new research shows that the gap between security concern and preparedness is overwhelming for utility, oil and gas, energy and manufacturing organizations. Some 70%  of critical infrastructure companies have suffered a security breach, whereas 66% of organizations consider malicious insider attacks or accidental breaches more likely than external attacks. Over the last two years, the number of insider incidents has increased by 47%. Insider threat stats reveal that more than 70% of attacks are not reported externally.

The DOJ, in announcing charges in four separate insider trading cases – collectively charging nine defendants with securities fraud, illustrates the Internal Threat. The defendants in these cases made between hundreds of thousands and millions of dollars from illegal securities trading based on material, non-public information that was stolen from numerous sources. It also brings into question why the FBI has not emphasized the inside threat as it should have and only did so in connection with China. In remarks prepared on April 27, 2022, for delivery to the Domestic Security Alliance Council, FBI Director Christopher Wray made it clear the counterintelligence threat posed by China is top of mind, and ” nothing presents a broader, more severe threat to our ideas, our innovation, and our economic security than the People’s Republic of China.

Insiders with Motive Have MOM: Motive, Means and Opportunity to Commit a Crime, Including Voter Fraud

Those charged include Stephen Buyer, a former U.S. Congressman from Indiana, FBI Academy trainee Seth Markin, According to court records, Buyer engaged in two separate, but interrelated insider trading schemes to steal material non-public information that he obtained through consulting work and place timely, profitable securities trade based on that stolen information.  Ahead of the Sprint/ T-Mobile merger, Buyer breached his duty of confidentiality to T-Mobile and misappropriated that information by purchasing shares of Sprint across several brokerage accounts, including his own accounts, an account held jointly with his cousin, and an account in the name of a close personal friend.   Across these accounts, Buyer made more than $126,000 from the purchase and subsequent sale of Sprint stock after the merger was publicly announced.  In or about June through August 2019, Buyer traded in shares of Navigant Consulting, Inc. ahead of Navigant’s acquisition by consulting and advisory firm Guidehouse. Buyer determined through his consulting work for Guidehouse that Guidehouse intended to acquire Navigant, and misappropriated that information by purchasing Navigant shares ahead of the public announcement of the acquisition.  Buyer purchased Navigant through several brokerage accounts, including accounts in his own name, joint accounts held with family members, and another person’s account. In total, Buyer made more than $223,000 from his illegal Navigant trades.  Buyer, 63, of Noblesville, Indiana, has been charged with four counts of securities fraud.

In early 2021, Seth Markin and Brandon Wong together made more than $1.4 million dollars in illegal profits by trading in stock based on inside information that Markin misappropriated from his then-girlfriend, who was then an attorney at a major law firm in Washington D.C. assigned to work on the acquisition of Pandion Therapeutics by Merck & Co.   After misappropriating this material non-public information from his girlfriend, Markin purchased shares in Pandion, and tipped several friends and family members, including Wong.  Wong, in turn, purchased hundreds of thousands of dollars’ worth of Pandion shares, and told at least eight other people to purchase Pandion shares.  In total, Markin and Wong directly or indirectly caused more than twenty people to trade in Pandion stock based on the material non-public information that Markin misappropriated from his girlfriend resulting in millions of dollars of illegally obtained trading profits. At the time of the relevant trades, Markin had been accepted into the Federal Bureau of Investigation as a new agent trainee.  

Markin, 31, of Washington Crossing, Pennsylvania, was arrested Monday and has been charged with nine counts of securities fraud and eight counts of tender offer fraud.  Wong, 38, of New York, was also arrested Monday and has been charged with eleven counts of securities fraud and ten counts of tender offer fraud.

From November 2020 through April 2020, Amit Bhardwaj, Sirinavas Kakkera, Abbas Saeedi  engaged in an insider trading scheme in which Bhardwaj, who was the Chief Information Security Officer (“CISO”) of Lumentum Holdings Inc., misappropriated material, non-public information belonging to Lumentum and then traded on that information himself and tipped his criminal associates, including Kakkera,  Saeedi, Dhirenkumar Patel, and Ramesh Chitor, in connection with two separate potential acquisitions by Lumentum, Coherent, Inc. and Neophotonics Corporation  

Bhardwaj,, 49, of San Ramon, California, who was arrested Monday, has been charged with seven counts of securities fraud and two counts of wire fraud, and one count of conspiracy to commit securities fraud and wire fraud, and one count of conspiracy to obstruct justice. LKakkera 47, of Pleasanton, California, was arrested Monday and has been charged with one count of securities fraud and one count of wire fraud and one count of conspiracy to commit securities fraud and wire fraud, and one count of conspiracy to obstruct justice.  Saeedi, 47, of Fremont, California, was arrested Monday and has been charged with one count of securities fraud and one count of wire fraud, and one count of conspiracy to obstruct justice, each of which carries a maximum term of 5 years in prison. Also unsealed Monday were charges against Dhirenkumar Patel and Ramesh Chitor, who have separately pled guilty and are cooperating with the Government in this case.

Brijesh Goel was an investment banker in the financing group at a major international investment bank in New York, New York. In that position, GOEL received confidential, internal emails directed to the Investment Bank’s Firmwide Capital Committee, which contained detailed information and analysis about potential mergers and acquisitions transactions the Investment Bank was considering financing.  In violation of the duties that he owed to the Investment Bank, GOEL misappropriated that confidential information and tipped a friend, who worked at another investment bank in New York, New York (“CC-1”), with the names of potential target companies from these FWCC emails, typically during in-person meetings (such as when the two met to play squash).  CC-1 then used that MNPI to trade call options, including short-dated, out-of-the-money call options, in brokerage accounts that were in the name of CC-1’s brother.  Goel and CC-1 agreed to split the profits from their trading.  Between approximately 2017 and 2018, Goel ipped CC-1 on at least seven deals in which the Investment Bank was involved, yielding total illegal profits of approximately $280,000.  Goel, 37, of New York, New York, has been charged with four counts of securities fraud and one count of obstruction of justice, and one count of conspiracy to commit securities fraud and tender offer fraud.

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