SAN FRANCISCO (CBS SF) – Three employees at San Francisco cloud communications company Twilio are among seven people charged in connection with a $1 million insider trading scheme, the Securities and Exchange Commission announced.
According to an agency statement, engineers Hari Sure, Lokesh Lagudu and Chotu Pulagam, along with acquaintances Dileep Kamujula, Sai Nekkalapudi, Abhishek Dharmapurikar and Chetan Pulagam were charged. The seven are accused of generating more than $1 million in collective profits by insider trading ahead of the company’s earnings announcement in May of 2020.
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“We allege that this insider trading ring took advantage of valuable revenue information related to the pandemic at a San Francisco tech company,” said Monique C. Winkler, acting regional director of the agency’s regional office in San Francisco. “We are holding these alleged tippers and tippees accountable for their roles in the scheme.”
According to the SEC complaint, the three employees had access to databases relevant to the company’s reporting of revenue. When the COVID-19 pandemic struck in March of 2020, the employees noted increased use of the company’s products and concluded in a group chat Twilio’s stock would “rise for sure.”
The complaint went on to alleviate the employees tipped off or used brokerage accounts of their family and close friends to trade Twilio stocks and options ahead of the announcement.
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In a separate statement, Northern California US Attorney Stephanie Hinds’ office detailed criminal charges against Kamujula, a 35-year-old Fremont resident. Kamujula has been charged on two counts.
“This Office will continue to aggressively pursue this type of securities fraud because it threatens the integrity of the markets and hurts everyone who plays by the rules,” Hinds said in a statement.
According to Kamujula’s indictment, he allegedly used information from one of the insiders to purchase 257 call options for the total cost of $133,333 in the weeks leading up to the announcement. Following the quarterly earnings announcement, in which Twilio’s stock price increased by nearly 40%, Kamujula sold all 257 options for a total profit of about $961,662.
“Insider trading is not a game – it’s a federal crime,” said acting Special Agent in Charge Timothy Stone of the FBI. “This investigation should be a forceful disincentive for those tempted to commit any type of securities fraud.”
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Kamujula made his first court appearance on Monday and is out on secured bond, according to federal prosecutors. If convicted of both counts, he faces a maximum of 45 years in federal prison and more than $5 million in fines.