Puneet Dikshit charged for insider trading at McKinsey, 2nd Indian after Rajat Gupta

Indian-origin McKinsey partner, Puneet Dikshit illegally traded GreenSky call options and earned $450,000 while he was a member of the acquisition team.

A 40-year-old Indian-origin partner, Puneet Dikshit at McKinsey & Company, was arrested on Wednesday on alleged insider trading charges and earning illegal profits of over $450,000 in America.

Dikshit, a partner at a global management consulting giant, is charged with ‘illegally trading in advance of a corporate acquisition by one of the McKinsey clients in September,” according to the Securities and Exchange Commission (SEC) statement.

In 2012, former and the first foreign-origin CEO at McKinsey, Rajat Gupta, was convicted of insider trading. He was sentenced to two years in prison by the court.

The details of the charges

He was charged with two counts of securities fraud – violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. He, therefore, faces up to 20 years in prison for each count, the US Department of Justice said in the press release.

While representing the management firm as a partner, Dikshit learned highly confidential information about The Goldman Sachs Group’s forth-coming acquisition plans of fintech firm, GreenSky Inc, the SEC statement read.

As per the complaint filed in Manhattan’s Federal District Court, SEC alleged that Puneet used insider information to purchase out-of-money GreenSky call options. The calls options were about to expire just two days after the announcement of the acquisition in September 2021. CNBC reported that GreenSky share prices soared 44% following this incident.  

The complaint further read that Puneet Dikshit has violated his firm’s policies as he failed to pre-clear these options purchases. He sold them on the acquisition announcement morning, reaping illicit profits of $450,000.

US Attorney Damian Williams said in a statement, “As alleged, Puneet Dikshit, a consulting firm partner, exploited his access to the encrypted material and non-public information about a pending acquisition of GreenSky, Inc., to trade in GreenSky call options. It is a breach of duties to his firm and its investment bank client.  Now, Puneet Dikshit has been charged with serious felonies for his alleged conduct.”

Dikshit has allegedly misused the available nonpublic information to trade on GreenSky call options, FBI Assistant Director Michael J. Driscoll said in a statement. Puneet Dikshit’s lawyers at Kramer Levin did not immediately respond to requests for comment, CNBC reported.

Meanwhile, McKinsey has terminated his employment for gross violation of their policies and code of conduct, CNBC reported.

How Puneet Dikshit did it?

The unsealed complaint at Manhattan court said that the Investment Bank (Goldman) engaged the Consulting Firm (McKinsey) to provide consulting services in consideration of their acquisition of GreenSky and its post-acquisition integration between November 2019 and July 2020, and again between April and September this year. As mentioned, he was one of the key McKinsey partners in the process. He had access to material, nonpublic information, which he misappropriated and violated his professional duties.

He carried out his trading between July 26 and September 15 while he was one of the key members of the acquisition team. “At various times [he] purchased and sold relatively small numbers of GreenSky call options, which had expiration dates weeks or months from the time of purchase,” the statement from the attorney’s office said.

“However, in the two days before the acquisition announcement, Dikshit sold all of these longer-dated GreenSky call options and bought around 2,500 out-of-the-money GreenSky call options that were due to expire just a few days later, on September 17. Then, after the deal was announced, he sold these calls and realized profits of approximately $450,000.

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