Original URL: http://www.theregister.co.uk/2012/07/20/stec_sec/
CEO of fallen flash sweetheart STEC charged with insider trading
SEC alleges boss made $134m in 'fraudulent' deal
US financial watchdog SEC has charged STEC CEO Manouch Moshayedi with insider trading. The agency alleged the flash guru exploited confidential information to make some money in a secondary offering of STEC shares.
The SEC alleged:
Moshayedi learned critical nonpublic information that was likely to have a detrimental impact on the stock price... Moshayedi did not call off the offering and abstain from selling his shares once he possessed the negative information ... Instead, he... proceeded with the sale of 9 million shares from which he and his brother reaped gross proceeds of approximately $134 million each.
STEC was once the flash memory industry's darling, selling its Zeus solid-state disks (SSDs) to EMC, IBM and others as fast hard drive replacements in their data arrays.
But other vendors came in with cheaper multi-level cell (MLC) flash products and STEC lost the round. At one time it was valued at almost $2bn, but it's now worth a more modest $352m as it builds out its product line of SSD and PCIe flash card products for enterprises.
Stifel Nicolaus analyst Aaron Rakers said the SEC investigation probed events surrounding STEC's $120m EMC supply deal in the second half of 2009, when STEC made a secondary share offering.
The SEC claimed Moshayedi knew more than the public about EMC's declining purchases of STEC's flash gear, and that this would lower the STEC share price, and alleged that he traded shares based on this information.
In its civil, not criminal action, the SEC asked the court [PDF] for an injunction against Moshayedi forbidding him from breaking federal securities laws as well as what it refers to as a "disgorgement of ill-gotten gains", plus pre-judgment interest; a fine; and a bar on Moshayedi being an officer or director of any public company.
As Moshayedi is also STEC's chairman, the company's lead independent director, Kevin Daly, issued a canned statement: "With the conclusion of the [SEC] investigation, we remain confident that an independent trier of fact will find that the commission's allegations against Manouch Moshayedi, our chief executive officer, are without merit." ®