NEW YORK (Reuters) - A Pakistani man violated U.S. securities law by illegally trading Integrated Device Technology Inc IDTI.O stock options after submitting a bogus takeover bid for the chipmaker, a federal judge ruled on Tuesday.
U.S. District Judge Paul Gardephe in Manhattan ruled in favour of the U.S. Securities and Exchange Commission in a case it brought against Nauman Aly in 2016. Gardephe said no trial was necessary to decide the case, one of several enforcement actions the SEC has brought over fake filings in the agency’s electronic Edgar system.
Gardephe ordered the SEC and Aly, who has represented himself, to submit court filings on appropriate remedies next month. Aly, who lives in Pakistan, did not immediately respond to an email seeking comment.
A magistrate judge in Manhattan froze the assets in a U.S.-based brokerage account belonging to Aly on the same day the SEC brought its case, according to court filings.
Integrated Device shares soared more than 23 percent on April 12, 2016, following an SEC filing that falsely said Aly and six Chinese investors had offered to buy the company for $4.3 billion.
Most of the gains evaporated after Integrated Device’s chief executive said the San Jose, California-based company had not talked with the investor group.
The SEC said Aly had paid $18,500 for Integrated Device call options, a bet the stock price would rise, at 11:50 a.m. that morning, and sold them at a profit at 12:18 p.m., 10 minutes after the bogus filing became public.
Aly said in a court filing that he was invited to take part in a takeover bid for Integrated Device by a stranger he met on the street in Karachi, and that he believed his April 12 filing was accurate. Aly said in a deposition that he sold his options when he did because he “felt like it,” according to Gardephe’s opinion.
Gardephe said that even if Aly’s “fanciful” story were true, he would still be liable for ignoring obvious signs that the bid was fake.
U.S. authorities have brought other cases over fake Edgar filings.
In May 2017, prosecutors charged Robert Walter Murray with submitting a sham filing in which a nonexistent investment fund offered to buy Fitbit Inc, and making about $3,000 trading in Fitbit stock. Murray, 25, was sentenced to two years in prison earlier this month.
In March 2017, prosecutors unsealed criminal charges against Nedko Nedev, a U.S.-Bulgarian citizen accused of filing hoax takeover bids for Avon Products Inc and Rocky Mountain Chocolate Factory Inc. Nedev was arrested in Bulgaria but has not been extradited.
Reporting by Brendan Pierson in New York; Editing by Leslie Adler