The FBI has arrested Sandeep Aggarwal, founder of e-commerce company ShopClues on Insider trading charges. Before starting ShopClues, Aggarwal was a Wall Street analyst and allegedly tipped off Richard Lee, a portfolio manager at SAC Capital, about a partnership between Microsoft & Yahoo.

The SEC alleged last Thursday that Lee’s illegal trading based on nonpublic information helped his hedge fund generate more than $1.5 mn in illegal profits. The trading occurred ahead of public announcement about a Microsoft-Yahoo partnership and the acquisition of 3Com Corporation by Hewlett Packard, said the Securities and Exchange Commission.

According to the SEC statement:

Lee thanked the analyst for the “very specific information” and promptly purchased hundreds of thousands of shares of Yahoo stock in a portfolio that he managed on behalf of S.A.C. Capital.  Lee also purchased shares of Yahoo stock in his personal trading account.

As per Business Insider, Aggarwal has also been civilly charged by the Securities and Exchange Commission.

Shopclues Founder Sandeep Aggarwal
Shopclues Founder Sandeep Aggarwal

On the evening of July 9, 2009, AGGARWAL learned from a friend who was an employee of Microsoft that discussions about the Partnership had recommenced and that a transaction was likely within the next few weeks. The next day, AGGARWAL provided information about the Partnership to at least two different hedge funds, including to Richard Lee, then a portfolio manager at SAC Capital Advisors LP. On July 10, 2009, AGGARWAL told Lee, in substance, that he had heard from a source – whom AGGARWAL described as “a senior guy at Microsoft” – that (a) senior Yahoo executives had been meeting with senior Microsoft executives at Microsoft’s offices; (b) senior Microsoft executives were making requests for information that suggested to the sources that a deal was likely to be completed soon; (c) the success of Microsoft’s Bing search engine had caused Yahoo to move closer to Microsoft’s offer; and (d) it was likely that the deal could be announced within the next two weeks. Thereafter, Lee’s hedge fund purchased several hundred thousand shares of Yahoo stock, and Lee purchased 25,000 shares of Yahoo stock in his personal account. [From the U.S. Attorney’s release]

Last week, Richard Lee pleaded guilty to insider trading charges.

“As alleged, Sandeep Aggarwal leveraged his contacts in the technology industry to obtain an illegal edge in the form of inside information about a highly anticipated development, and then lied about his criminal conduct. With his arrest today, we continue our work to investigate and prosecute privileged professionals who think the laws requiring honesty and fair play do not apply to them,” [Manhattan U.S. Attorney Preet Bharara, Via : BusinessInsider]

Shopclues.com recently raised $10 mn from Helion Venture Partners, Nexus Ventures and Netprice.com Chief Executive Officer Teruhide Sato. This development was earlier reported by Iamwire.

Updated: Sandeep Aggarwal Let Off on $500k Bond; Ordered Not To Leave US Until Friday Hearing

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