Indian American techie charged for trading scheme worth $8mn


A former senior Indian-American techie has pleaded guilty to the conspiracy of committing securities fraud and aiding in the preparation of a false tax return.

On Saturday, September 18, the US Securities and Exchange Commission (SEC) and the US Departme3nt of Justice (DOJ) announced civil and criminal charges involving an alleged brazen $8 million insider-trading scheme.

The trader, Dayakar Mallu, 51 allegedly traded ahead of four public announcements by his former employer, Mylan N.V., between October 3, 2017, and July 29, 2019.

He allegedly obtained material nonpublic information from a friend who still worked at Mylar at the time.  The tipper is described only as a “Mylan insider” in the SEC press release, but the DOJ press release calls him an unnamed co-conspirator.

Mallu is scheduled to be sentenced on January 24. He faces a maximum penalty of 25 years in prison for the conspiracy and three years in prison for the tax offense.

Mallu’s alleged insider trading enabled him to generate gains and avoid losses totaling over $8 million through well-timed options trades.  The SEC’s complaint maintains that Mallu obtained material nonpublic information about Mylan’s unannounced earnings, drug approvals by the FDA, and impending merger with another company.

According to court documents and his admissions in court, between 2017 and 2019 Mallu conspired with others to trade in the securities of Mylan, a NASDAQ-listed public company, in advance of corporate announcements concerning drug approvals, financial earnings, and a merger.

Mallu, who was the then vice president of Global Operations Information Technology of Mylan, and an unnamed co-conspirator, a Mylan executive, conspired to provide him with material, non-public information in advance of the company’s public announcements.

He then placed trades in the company’s securities and shared trading profits with his co-conspirator through cash transactions in India. His trading resulted in more than USD 8 million in unrealized profits and losses were avoided.

Mallu ultimately realized net profits and losses avoided of more than USD 4.2 million from his insider trading, the Department of Justice said.

He admitted in the court, that he sent false information to his tax preparer relating to Opel Systems LLC, a company he owned and controlled.

Specifically, Mallu falsely told the preparer that Opel had paid USD 1.3 million to a contractor when, in fact, he had caused Opel to transfer those funds to his securities brokerage account.

Mallu’s false statement resulted in the preparation of a false 2015 corporate return for Opel, the Department of Justice said.