Janardhan Nellore & Sivannarayana Barama Indicted for Palo Alto Networks Securities Fraud
December 17, 2019 - Janardhan Nellore (42) of Santa Clara and Sivannarayana Barama (45) of Fremont, CA were indicted for securities fraud related to Palo Alto Networks Inc. today by a federal grand jury in San Francisco.
Janardhan Nellore, an employee (IT Administrator) of Palo Alto Networks' information technology department, participated in insider trading scheme by trading and sharing confidential information about his employer's financial performance with Sivannarayana Barama and others.
The insider trading scheme of Nellore and Barama related to Palo Alto Networks Inc.(PANW) securities fraud allegedly generated in excess of $7 Million in illegal profits.
According to the superseding indictment unsealed today:
...Nellore, 42, of Santa Clara, Calif., and Barama, 45, of Fremont, Calif., are alleged to have participated in an insider trading scheme in which Nellore traded on and provided Barama and others with confidential, non-public, material, inside information about the financial performance of Palo Alto Networks, Inc. (“PANW”), headquartered in Santa Clara, Calif. Nellore worked in PANW’s Operations and Support group, an information technology department. Using his position at PANW, Nellore accessed and obtained material nonpublic information regarding PANW’s quarterly financial performance, including PANW’s target and actual billings, bookings, revenue, and growth rate. With that inside information, Nellore acted as both a trader and a tipper. Nellore traded PANW securities using inside information before the company disclosed its financial results to the public. In a number of “straddle trades,” Nellore placed call and put options before earnings announcements and sold the options after the announcements.
... Nellore shared the inside information with Barama and others, who Nellore knew would trade PANW securities using the inside information he had provided. Nellore also sometimes tried to conceal this scheme to defraud by using the brokerage accounts of others.
...from March 2015 through September 2018, Nellore, Barama, and others placed approximately 800 straddle trades of PANW securities, generating illegal profits in excess of $7 million as a result of the insider trading scheme. When making non-straddle trades of PANW securities or trading in other stocks, the conspirators lost money.
Nellore & Barama Arrested
Sivannarayana Barama was arrested December 17, 2019 in Fremont and was scheduled to make his initial appearance in San Jose federal court.And, Janardhan Nellore was arrested May 8, 2019 while trying to board an Air India flight at the San Francisco International Airport with one-way ticket to New Delhi, India for himself and his family.
Charges Against Nellore & Barama
The charges against Janardhan Nellore include:- One count of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 1349
- Six counts of securities fraud and aiding and abetting, in violation of 18 U.S.C. §§ 1348
- Three counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1)
- One count of conspiracy to commit securities fraud, in violation of 18 U.S.C. § 1349
- Six counts of securities fraud and aiding and abetting, in violation of 18 U.S.C. §§ 1348
Potential Penalty
On the conspiracy to commit securities fraud charge, if convicted, both Janardhan Nellore and Sivannarayana Barama face a maximum statutory sentence of 25 years in prison and a fine in the amount of $250,000.And the securities fraud charges against Nellore and Barama carry a maximum statutory sentence of 25 years in prison and a fine in the amount of $250,000.
If convicted on aggravated identity theft charges, Janardhan Nellore faces a mandatory minimum statutory sentence of two years in prison and a fine in the amount of $250,000.
In addition, the court may sentence Janardhan Nellore and Sivannarayana Barama to an additional term of supervised release and impose fines or other assessments, restitution, and forfeiture.
The security fraud charges are mere allegations and Janardhan Nellore and Sivannarayana Barama must be presumed innocent until proven guilty beyond a reasonable doubt.
Civil Case
Besides the criminal indictment, a civil action case was filed today against Janardhan Nellore, Sivannarayana Barama, Ganapathi Kunadharaju, Saber Hussain and Prasad Malempati by Securities and Exchange Commission in the Northern District of California.According to the SEC's complaint:
...th defendants sought to evade detection, with Nellore insisting that the ring use the code word “baby” in texts and emails to refer to his employer’s stock, and advising they “exit baby,” or “enter few baby.” The complaint also alleges that certain traders kicked back trading profits to Nellore in small cash transactions intended to avoid bank scrutiny and reporting requirements.
...Nellore and his friends exploited Nellore’s access to valuable earnings information and attempted to hide their misconduct using code words and carefully tailored cash withdrawals.
SEC Charges Against Five Indian Friends
Janardhan Nellore, Sivannarayana Barama, Ganapathi Kunadharaju, Saber Hussain and Prasad Malempati are charged with fraud by SEC.And, SEC seeks permanent injunctions, disgorgement with prejudgment interest, and penalties against Janardhan Nellore, Sivannarayana Barama, Ganapathi Kunadharaju, Saber Hussain and Prasad Malempati for their multimillion dollar insider trading ring.