Two South Bay Residents To Face Securities Fraud Charges While A Third Defendant Pleads Guilty
All Three Defendants Are Alleged To Have Been Involved In the Illegal Transfer or Use of Insider Information for the Purpose of Trading Infinera Securities
SAN FRANCISCO –The office of the United States Attorney for the Northern District of California has filed securities fraud charges against Benjamin J. Wylam and Nathaniel A. Brown in connection with the illegal use of insider information obtained from Sunnyvale-based technology company Infinera Corporation. Each defendant was charged in a separate criminal information filed today. In related proceedings, Naveen Sood has pleaded guilty to one count of securities fraud for engaging in transactions in Infinera securities after receiving material nonpublic information about the company. That guilty plea was made public today.
One criminal information was filed against Brown, 49, of San Jose. According to the Brown information, the defendant was a Senior Revenue Manager employed in Infinera’s finance organization from 2011 to 2017. During the period April 2016 through November 2017, Brown allegedly used deceptive or improper means to collect confidential information related to Infinera’s financial performance and financial projections. Once in possession of the nonpublic information, Brown allegedly used the messaging service WhatsApp, among other means, to share the information with an individual Brown knew would use it to execute securities transactions in Infinera stock.
Another criminal information was filed today against Wylam, 42, of San Jose. The Wylam information alleges that during the period April 2016 through November 2017, Wylam used WhatsApp, among other means, to receive confidential information from another individual about Infinera’s financial performance and financial projections. Wylam allegedly knew when he received the information that it had been obtained through deceptive or improper means but nevertheless used the information for his own use while executing securities transactions in Infinera stock. The Wylam information contains a forfeiture allegation seeking a money judgment of $999,000, alleging that that amount constitutes or is derived from proceeds that Wylam obtained as a result of the criminal violation.
On March 31, 2021, Sood, 49, of Campbell, Calif., signed a written agreement in connection with submitting his guilty plea. The plea agreement was accepted by the Honorable Edward M. Chen, United States District Judge, and today, the agreement was unsealed. According to the plea agreement, Sood admitted that he socialized with two individuals, one of whom he knew regularly had access to confidential information about Infinera’s quarterly financial results and financial prospects before that information became available to the public. In the plea agreement, Sood refers to the individuals as Individual 1, to whom Sood owned a debt in April of 2016 of more than $100,000, and Individual 2, who Sood concluded was an employee of Infinera and was the source of the confidential information. Sood acknowledged that in the spring of 2016, Individual 1 presented him with what was described as an opportunity to get cash to pay off the $100,000 debt by trading in Infinera stock. Individual 1 divulged that Infinera was going to report lower-than-expected revenues for the quarter. In addition, Sood admitted that thereafter, Individual 1 regularly provided him with material nonpublic information about Infinera and, over time, the material nonpublic information he received became more detailed. For example, in August of 2017, Individual 1 informed Sood via WhatsApp that Infinera was going to report actual revenues of $176.8 million and projected revenues of $188 million for the second quarter and third quarter of 2017, respectively. Knowing that these figures fell short of Wall Street analysts’ expectations, Sood purchased put options in Infinera prior to its earnings announcement and later sold the options for a profit of $36,455. Sood admitted that he used his own and another person’s brokerage accounts to execute trades based upon material nonpublic information and that he acquired no less than $215,000 in criminal proceeds from the violations of the law described in the plea agreement.
In sum, Brown, Wylam, and Sood each were charged with one count of securities fraud, in violation of 18 U.S.C. § 1348. The informations contain allegations only; Brown and Wylam are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. If convicted, Brown and Wylam face the same maximum statutory penalties as Sood; the maximum statutory penalties for a violation of 18 U.S.C. § 1348 is 25 years in prison and the greater of either $250,000 or twice the gross gain made from the offense. The court also may order additional terms of supervised release, fines, forfeitures, and restitution; however, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The next federal court appearance scheduled for Brown is on June 16, 2021, for arraignment and additional proceedings. The next federal court appearance scheduled for Wylam is on June 23, 2021, for arraignment and additional proceedings. The next federal court appearance scheduled for Sood is September 8, 2021, for a status conference.
The Securities and Exchange Commission has filed a separate enforcement action against Brown, Wylam, Sood, and three others. The announcement of that action can be viewed here.
Assistant U.S. Attorney Kyle Waldinger is prosecuting the case with assistance from Kathy Tat. This case was investigated by the FBI. The Department of Justice appreciates the assistance of the Securities and Exchange Commission.