South Asian origin man sentenced to 30 months for insider trading

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A South Asian-American from Dublin, California, was sentenced to more than 2 years in prison for insider trading.

Saleem M. Khan was sentenced Aug. 2, to 30 months for his participation in an insider-trading conspiracy related to the securities of Ross Stores, Inc. from which, according to evidence presented by prosecutors, he made gains of as much as $8.2 million.

The United States Attorney for the Northern District of California, David L. Anderson made the announcement about Khan’s sentence along with other agency officials concerned in the investigation. The sentence was handed down by the U.S. District Judge Haywood S. Gilliam, Jr.

Khan pleaded guilty to the charges on January 31, 2019.

According to the plea agreement, Khan admitted that during the period July 2009 to October 2012, he got material, non-public information relating the sales and financial performance of Ross Stores, Inc. from a friend.

Ross is a discount-clothing retailer then headquartered in Pleasanton, Calif.  Khan’s friend worked in Ross’s finance department.

Khan acted on the information and entered into options contracts regarding Ross securities in advance of Ross’s monthly sales announcements.  He used brokerage accounts held both in his name and in names of nominees.

In his plea agreement, Khan admitted he compensated the friend who gave him the information, including by providing $130,000 to the tipper through third parties and by purchasing items on the tipper’s behalf.

Khan also admitted he made profits in excess of $3,500,000 as a result of the scheme.

At sentencing, the government presented evidence showing that Khan had made realized gains from trading in Ross option of as much as $8.2 million between July 2009 and October 2012.

An article in Law360.com, about this case, indicated that Khan is of Pakistani origin, noting that “the letters depicted Khan as a caring member of the Pakistani community…”

On November 2, 2017, a federal grand jury returned a superseding indictment against Khan charging him with one count of conspiracy to commit securities fraud, nine counts of securities fraud, and one count of obstruction of justice.  Khan pleaded guilty to the conspiracy and securities fraud counts.  The remaining count was dismissed at today’s (Aug. 2) sentencing hearing.

Khan was also sued by the Securities and Exchange Commission (SEC) pertaining to the same insider-trading scheme in the following civil case: Securities and Exchange Commission v. Saleem Khan et al., filed June 13, 2014). In September 2016, the court entered a final judgment in the civil case against Khan ordering him to pay more than $15 million in disgorgement, penalties, and prejudgment interest.  In that case, Khan agreed to settle the charges against him without admitting or denying the allegations in the civil complaint, and he consented to the entry of final judgment.

In addition to the prison term which will begin Nov. 4, Judge Gilliam sentenced Khan to a two-year period of supervised release.

The Court scheduled a hearing on October 21, 2019, for the purpose of determining whether and to what extent Khan should be ordered to pay restitution to Ross.  The press release from the U.S. Attorney’s Office said Khan may be ordered to pay attorney’s fees incurred by Ross resulting from the company’s participation in the government’s investigation and prosecution of Khan.

 

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