SEC Busts Alleged Silicon Valley Insider Trading Ring

Six are charged with trading on material, nonpublic information involving Infinera and Fortinet.


With the help of “sophisticated data analysis” the US Securities and Exchange Commission (SEC) said it was able to break up an insider trading ring that generated nearly $1.7 million in illegal gains by trading on the confidential earnings information of Silicon Valley tech companies Infinera Corporation and Fortinet Inc.   

According to the SEC’s complaint, Nathaniel Brown, who was the revenue recognition manager for San Jose, California-based telecommunications equipment company Infinera Corporation, repeatedly provided information about the company’s quarterly earnings and financial performance before they were made public to his best friend, Benjamin Wylam, a high school teacher and bookmaker.

The SEC alleges Wylam traded on the tips and also passed the information on to Naveen Sood, who owed Wylam a six-figure gambling debt. Sood allegedly also traded on the information and tipped his friends Marcus Bannon, Matthew Rauch, and Naresh Ramaiya, each of whom also illegally traded on the information, according to the complaint.

For example, after allegedly receiving material nonpublic information from Brown that Infinera’s upcoming second quarter announcement would be negative, Wylam built a large short position on the stock. Between July 11 and July 27, 2016, Wylam sold the 6,500 Infinera shares that he owned, shorted 17,900 Infinera shares, and purchased nearly 4,000 Infinera put option contracts. In total, Wylam spent $326,000 accumulating a short position before Infinera’s negative second quarter announcement.

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The regulator also alleges Bannon provided Sood with material, nonpublic information about cybersecurity company Fortinet Inc., where he worked. The SEC alleges that in early October 2016, Bannon learned that Fortinet was going to unexpectedly announce preliminary financial results that were negative. Bannon allegedly tipped this information to Sood, who used it to trade on, and who then passed on the information to Wylam and Ramaiya, who also traded on the information.

Without admitting to or denying the allegations in the complaint, Bannon, Rauch, and Ramaiya consented to the entry of final judgments. Bannon agreed to pay a civil penalty of over $280,000; Rauch agreed to pay a civil penalty of over $128,000; and Ramaiya agreed to pay a civil penalty of nearly $66,000. Sood also consented to the entry of a final judgment and agreed to pay a civil penalty of more than $178,000. Wylam has consented to a permanent injunction with civil penalties, if any, to be decided later by the court. The SEC said its litigation against Brown is ongoing.

“Using sophisticated data analysis, the SEC was able to uncover this insider trading ring and hold each of its participants accountable to ensure the integrity of our markets,” Joseph Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit, said in a statement.  

The US Attorney’s Office for the Northern District of California, in a parallel investigation, filed related criminal charges against Brown, Wylam, and Sood.

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Jerome Powell Has the Worst Fed Day Record for Stocks

S&P 500 returns are mainly negative on day he announces decisions; not so for prior chairs.


Federal Reserve Chair Jerome Powell seems to have the reverse Midas touch with the stock market—at least when it comes to how the S&P 500 performs on Fed Day.

Fed Day is when the bank’s policymaking panel, the Federal Open Market Committee (FOMC), releases its decisions and the chair has a news conference. And during that one day, almost always a Wednesday, Powell has the worst market record of all his recent predecessors. 

Of the central bank’s four chairs since Fed Day began, in 1994, only Powell has seen a negative average number on the S&P 500 for his Fed Days, according to a tabulation from Bespoke Investment Group.

Powell, who took over in February 2018, has the shortest tenure of the four chairs, and it’s unclear whether he’ll get a second four-year term. On Wednesday, the latest Fed Day, the S&P 500 fell 0.54%, in keeping with the pattern under Powell. Four Fed Days have occurred to date in 2021, and the index dipped on three of them. 

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That goes against the grain of history. Overall, the index has performed well on Fed Days, posting an average one-day gain of roughly 0.30%, Bespoke found. 

Of the four chairs since 1994, the champ is Ben Bernanke (who led the Fed from 2006 to 2014), averaging around 0.50% on Fed Days. Alan Greenspan, the longest-serving chief of the bunch (1987-2006) and Janet Yellen (2014-18) were tied at just below the 0.3% average gain for all Fed Days. In Powell’s case, the market declines have tended to come toward the end of the trading day, after he has started speaking to reporters at 2:30 p.m. Eastern.

Why the difference between him and the other three? Some Wall Streeters think the market now is hooked on low, low rates and bounteous bond buying—in a way that it wasn’t under previous Fed chairs. Hence, the thought of reversing loose-money policy destroys that comfort. An extra dollop of leeriness from the pandemic may have deepened this sentiment, the reasoning goes.  

What came out of Wednesday’s Fed Day was that Powell and his bank are considering rate increases by 2023 (some members think it will start earlier) and are contemplating trimming their rampant bond buying, a stimulus move known as quantitative easing (QE). In reference to the QE curtailment, he told the press yesterday to “think of this meeting as the talking-about-talking-about meeting.”

Meanwhile, the so-called “dot plots,” where the 12 FOMC members speculate on when short-term rates might begin climbing and other policy matters, show a greater inclination toward policy tightening. Seven FOMC officials now expect to lift rates next year, up from four in March. Markets have anticipated no rate change before 2024.

Further, five members now predict the benchmark federal funds rate to rise to 1% or more by 2023 (it’s now between zero and 0.25%). This suggests rates will increase both sooner and faster than many expected.  

To be sure, in Powell’s public remarks and the committee’s statement Wednesday, the central bank made clear it wouldn’t make any major moves imminently. The Fed still wants to see inflation at a steady 2% and employment higher.

Despite the recent inflation spike, the Fed now believes core inflation will be 3% as reflected in the personal consumption expenditure index, the bank’s favorite measure. In March, that estimate was 2.2%.

“That still looks on the low side to us,” meaning the 3% forecast, wrote Ian Shepherdson, chief economist of Pantheon Macroeconomics, in a research note. He, for one, expects the Fed to start reducing its bond purchases this year and start hiking rates in 2022.

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