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Former Palo Alto Networks Employee Charged With Insider Trading

A former employee of Palo Alto Networks and his friends have been charged by the U.S. Securities and Exchange Commission (SEC) for their roles in an insider trading ring.

According to the SEC, Janardhan Nellore, aged 42, abused his position as an IT administrator at Palo Alto Networks to obtain information that allowed him and four of his friends to earn over $7 million by trading the company’s securities.

Nellore allegedly used his IT credentials and work contracts to obtain confidential information about Palo Alto Networks’ quarterly earnings and financial performance before they were made public.

The SEC complaint provides several examples showing how the group made hundreds of thousands and even millions of dollars by trading stock based on information obtained by Nellore.

In an effort to avoid being detected, Nellore and his friends used code words in the text messages and emails they exchanged. For example, they used the word “baby” when referring to Palo Alto Networks stock and Nellore used “exit baby” and “enter few baby” to offer trading advice.

In addition, some of the trading profits were sent to Nellore by his accomplices in small cash transactions in order to avoid raising suspicion with banks.

Nellore’s friends who are named in the SEC complaint are Sivannarayana Barama, Ganapathi Kunadharaju, Saber Hussain and Prasad Malempati. In addition to the SEC fraud charges, criminal charges have been announced against Nellore and Barama by the U.S. Attorney’s Office for the Northern District of California.

At some point, Barama and Hussain worked as contractors for Palo Alto Networks and Malempati was employed by the company.

Nellore is accused of conducting insider trading starting with 2015 and until earlier this year, when he was fired by Palo Alto Networks. In May, after he was interviewed by the FBI about the trading, Nellore bought one-way tickets for himself and his family to India, but he was arrested at the airport.

The cybersecurity company reported last month that its total revenue for the first fiscal quarter of 2020 increased by 18 percent year-over-year to $771.9 million.

UPDATE. Palo Alto Networks has provided SecurityWeek the following statement:

We are committed to the highest standards of ethical and legal conduct, and expect our employees to adhere to these same standards. This issue involved two non-executive level employees and two contractors, who were either terminated or had previously left the company. Palo Alto Networks has not been charged in any of these actions. We have been and continue to be in full cooperation with authorities.

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Eduard Kovacs (@EduardKovacs) is a contributing editor at SecurityWeek. He worked as a high school IT teacher for two years before starting a career in journalism as Softpedia’s security news reporter. Eduard holds a bachelor’s degree in industrial informatics and a master’s degree in computer techniques applied in electrical engineering.