U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22010 / June 21, 2011
SEC v. Galleon Management, LP, et al., Civil Action No. 09-CV-8811 (S.D.N.Y.) (JSR)
Former Schottenfeld Proprietary Trader Gautham Shankar Settles SEC Insider Trading Charges
The Securities and Exchange Commission announced today that on June 8, 2011, The Honorable Jed S. Rakoff of the United States District Court for the Southern District of New York entered a judgment against Gautham Shankar in SEC v. Galleon Management, LP, et al., 09-CV-8811, an insider trading case the SEC filed on October 16, 2009. The SEC charged Shankar, who was a registered representative and a proprietary trader at the broker-dealer Schottenfeld Group, LLC, during the relevant time period, with using inside information to trade ahead of impending acquisitions and earnings announcements.
In its action, the SEC alleged that, on July 2, 2007, Shankar was tipped with inside information that Hilton Hotels Corp. would be acquired the next day at a significant premium. Also in July 2007, Shankar was tipped with inside information about Google, Inc.’s results for its second quarter 2007. In March 2007, Shankar was tipped inside information that Kronos Inc. would be acquired in about a week for a substantial premium. On the basis of the material non-public information he received, Shankar traded in Schottenfeld accounts he managed, as well as an account of a third party.
To settle the SEC’s charges, Shankar consented to the entry of a judgment that: (i) permanently enjoins him from violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders him to pay disgorgement of $243,105.59, plus prejudgment interest of $34,462.35. The judgment further provides that the Court later will determine issues relating to a civil penalty. In a related SEC administrative proceeding, Shankar consented to the entry of an SEC order barring him from association with any investment adviser, broker, dealer, municipal securities dealer, or transfer agent. Shankar previously pled guilty to charges of securities fraud and conspiracy to commit securities fraud in a related criminal case, United States v. Gautham Shankar, 10-CR-996 (S.D.N.Y.), and is awaiting sentencing.
The SEC also announced today the entry of a judgment against Shankar in a separate case alleging insider trading in other securities. See SEC v. Cutillo et al., No. 09-CV-9208 (S.D.N.Y.) (RJS).