Silicon Valley Insider Trader Busted Ahead of Failed Merger

Technology

Published: March 17, 2017 10:35 am

Last Updated: January 12, 2020 1:52 pm

The U.S. Securities and Exchange Commission (SEC) recently announced that an auditor based out of Silicon Valley has agreed to settle insider trading charges. He is being accused of trading on private information from a client that was on the verge of a merger that did that not go through.

The agency found that through his work at an independent audit firm, Nima Hedayati learned that California-based Lam Research Corp. (NASDAQ: LRCX) was making preparations to acquire KLA-Tencor Corp. (NASDAQ: KLAC). Each of the two companies manufactures equipment used in the creation of semiconductors. According to the report, Hedayati proceeded to purchase out-of-the money call options in KLA common stock in his brokerage account as well as his fiancée’s brokerage account, and he also encouraged his mother to purchase KLA common stock.

After merger plans were publicly announced, KLA’s stock price increased nearly 20%, and Hedayati and his mother collectively profited by more than $43,000 from the illegal trades. Once Hedayati’s employer discovered his misconduct he was terminated.

Jina Choi, Director of the SEC’s San Francisco Regional Office, commented:

Hedayati abused his important position of trust and responsibility by illicitly trading on an audit client’s nonpublic information in a quest for an easy profit, and it wound up costing him a lot more in the end.

Without admitting or denying the SEC’s findings, Hedayati agreed to pay disgorgement of $43,027.59 plus $1,269.70 in interest and a $43,027.59 penalty for a total of more than $87,000. Hedayati agreed to be suspended from appearing and practicing before the SEC as an accountant.

The SEC is permitting him to apply for reinstatement after five years.