SAN FRANCISCO (CN) - A group of friends made $12 million illegally trading on inside information in Ross Stores stock, the SEC claims in court.
The SEC sued four defendants and two relief defendants, in Federal Court.
It claims that lead defendant Saleem Khan was "routinely tipped" about monthly sales reports by his friend, defendant Roshanlal Chaganlal, who was a director in the finance department at Ross headquarters in Dublin, Calif.
"Saleem Khan purchased Ross stock options and stock based on the information he learned from Chaganlal not only in his own accounts but in those of relief defendants Michael Koza and Saleem Khan's brother-in-law, Shahid Khan," the complaint states. It continues: "Saleem Khan traded ahead of over 40 Ross monthly and quarterly announcements between 2009 and 2012. On some days, his trading constituted over 90 percent of the options volume for the options series in which he traded. Saleem Khan generated realized and unrealized profits of approximately $5.4 million in his own account and approximately $6 million in Shahid Khan's account, which he also controlled. As part of the scheme, Chaganlal provided $17,000 to Saleem Khan, who used the funds for additional insider trading. To compensate Chaganlal for Ross' inside information, Khan later transferred at least $130,000 back to Chaganlal.
"Saleem Khan also provided Ross' inside information to his friend and supervisor, [defendant] Ranjan Mendonsa, and to his friend and colleague, [defendant] Ammar Akbari, both of whom also purchased Ross stock options based on the information, generating realized and unrealized profits of approximately $800,000 and $2,000, respectively."
The SEC seeks disgorgement and penalties.