Monday, September 11, 2017

Amazon Financial Analyst Charged With Insider Trading on Amazon Stock

The Securities and Exchange Commission has announced  that insider trading charges against a former Amazon financial analyst who allegedly leaked confidential information to his former fraternity brother in advance of a company earnings announcement so they could turn an illegal profit.  The college friend and his trading partner also are charged in the SEC’s complaint.
a company earnings.The college friend and his trading partner also are charged in the SEC’s complaint.

The SEC alleges that Brett Kennedy accessed nonpublic 2015 first quarter earnings information without authorization while working at Amazon and shared it with Maziar Rezakhani, who illegally traded on the financial results before their public release to make more than $116,000 in illicit profits.  According to the SEC’s complaint, Rezakhani paid Kennedy $10,000 in cash for the tip and also shared the trading profits with Sam Sadeghi, who was advising him on his brokerage account trades and joined Rezakhani at a meeting with Kennedy to discuss the nonpublic information.  The SEC’s complaint alleges that Rezakhani and Sadeghi aimed to establish a successful track record with the trading in Rezakhani’s brokerage account and together open a hedge fund in New York that would accept investments from others.

According to Breitbart, Wall Street analysts had expected Amazon to report first quarter revenue of $22.4 billion and a net loss of 14 cents. The information Kennedy obtained, however, showed Amazon's revenue would be $22.7 billion and the loss would be just 12 cents. Anticipating that this “beat” would push up the stock price, Rezakhani bought a bunch of shares of Amazon. To be precise, he bought 4,400 shares for $1.75 million. It’s not clear where the iPhone reseller came up with that kind of money.

John Carney at Breitbart goes on to comment:
In a somewhat unique twist to the case, Rezahkani decided against stealthily concealing his possession of Amazon’s non-public information. He took to online message boards and posted the figures as if they were a forecast. Maybe that was part of his plan to move to New York and start a hedge fund: he would be the guy who successfully predicted Amazon’s first quarter 2015 share price. What investor could resist?
Sadeghi and Kennedy agreed to settlements that are subject to court approval.  Without admitting or denying the allegations, Sadeghi agreed to pay disgorgement of $11,599.74 plus $1,035.39 in interest and an $11,599.74 penalty for a total of $24,214.87.  Kennedy agreed to pay disgorgement of $10,000 plus interest of $875.36.  In a parallel action, the U.S. Attorney’s Office for the Western District of Washington today announced criminal charges against Kennedy.

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