Technology

Pakistani Accused of Manipulating Tech Stock

The SEC says Nauman Aly made a $450,000 profit by submitting a bogus takeover offer for Integrated Device Technology.
Matthew HellerMay 25, 2016

A Pakistani man has been charged with manipulating the stock price of Integrated Device Technology Inc. by announcing a bogus takeover offer for the chipmaker.

The U.S. Securities and Exchange Commission said the announcement on its Edgar system instantly sparked a sharp rise in IDT’s stock price, enabling Nauman A. Aly, 32, to make $425,000 in options trading profits in less than 30 minutes.

At the SEC’s request, a Manhattan judge on Tuesday issued an order freezing Aly’s U.S. bank account so he cannot withdraw his alleged profits.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

“We allege that Aly tried to fool the markets from a computer in Pakistan to make an easy profit, but we made sure he didn’t cash in,” Andrew Ceresney, director of the SEC Enforcement Division, said in a news release. “Market manipulation doesn’t pay, no matter the method or how distant the perpetrator.”

The SEC said in a civil complaint that Aly purchased 1,850 call options in IDT for $18,500 at 11:50 a.m. on April 12. Eighteen minutes later, using an Edgar account he had opened in February, he filed a Schedule 13D form purporting to disclose he and five Chinese investors had acquired a 5.1% stake in IDT.

At the time of the purchase, IDT was trading at about $19.01 per share. “Because the options had an expiration date of April 15, 2016, the options would have expired worthless unless the IDTI stock price increased to more than $20 within three days,” the SEC noted.

The 13D filing also said Aly’s group had sent a letter to IDT’s board in which they offered to buy all of the company’s outstanding shares for $32.00 per share, a premium of 65% to the closing price on April 11.

“By any measure, we believe our proposal represents a compelling opportunity that your stockholders will find extremely attractive,” the letter said.

After IDT’s stock price increased by more than 25% to $23.99 in less than 10 minutes, Aly allegedly sold all of his options. A few hours later, IDT issued a press release saying it had not had “any communication whatsoever” with Aly’s group.