Former tech analyst Sandeep Aggarwal was arrested and charged today for leaking non-public information to a former SAC Capital portfolio manager.
Aggarwal is accused of leaking confidential deal talk between Microsoft and Yahoo to former SAC Capital (“Hedge Fund A”) portfolio manager Richard Lee back in July 2009.
The complaint alleges that on July 9, 2009, Aggarwal had a phone conversation with Lee about the pending deal. According to the complaint, Aggarwal told Lee that he heard from a “senior guy at Microsoft” that it was possible a Microsoft/Yahoo deal may happen within the next couple of weeks.
The complaint then alleges that after the phone conversation Lee purchased several hundred thousand of shares of Yahoo for his SAC portfolio. It also says that he bought 25,000 shares for his personal trading account.
Just last week, Lee pleaded guilty to insider trading charges, U.S. prosecutors said in a federal indictment against Stamford, Connecticut-based SAC Capital Advisors.
One interesting tid-bit in today’s complaint against Aggarwal is that a second unnamed hedge fund “Hedge Fund B” called up Aggarwal’s then-employer (Collins Stewart) to tell them that they suspected he had disseminated non-public information.
Collins Stewart confronted Aggarwal about this and he lied to his employer, the complaint alleges.
From the complaint [.PDF] (emphasis ours)
Based upon my review of documents provided by teh Firm, and an interview with a former employee at the Firm, I have learned the following:
On or about July 10, 2009, Hedge Fund B contacted the Firm and informed the Firm that it suspected that SANDEEP AGGARWAL, the defendant, was disseminating inside information.
Members of the Firm’s senior management, and legal compliance departments, questioned AGGARWAL about his communications with clients and his belief that there was a greater likelihood of a transaction between yahoo and Microsoft. AGGARWAL stated, in substance, that his sources of information were industry participants, not current employees of Microsoft or Yahoo nor professionals who could be involved with a transaction.
Following the interview, at approximately 1:46 p.m., AGGARWAL sent an e-mail to employees at the Firm, including the Firm’s then-head of research, in which AGGARWAL stated “Please note that I have been making some comments on a likely MSFT/YHOO search deal/partnership since morning and suggesting a higher likelihood for MSFT/Yahoo search deal” and that “My comments about MSFT/YHOO are based on my own assessment… and I have not heard anything to this regard either from current MSFT/YHOO employees or any bankers/layers etc involved in MSFT/YHOO possible deal.”
Subsequent to the 1:46 p.m. email, the Firm’s management question AGGARWAL again and he reiterated his statement that he had not received information from any current Microsoft or Yahoo employees. AGGARWAL identified his “best industry contact” (reference in his call with Hedge Fund B) as a former employee of Microsoft, who left the company more than two years earlier and AGGARWAL stated that he did not believe that his contact possessed material nonpublic information.
After Collins Stewart, Aggarwal worked at Oppenheimer & Co. and Caris & Co., FINRA records show. Before that, he worked at Citigroup, Microsoft and Charles Schwab, according to FINRA.
After leaving Wall Street, he started running ShopClues.com, an online marketplace in India. In his bio, he refers to himself as “one of the most popular and prominent Internet analysts in the US.”
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