SEC v. Sam Miri, Southern District of New York (Jan. 1, 2013) — Complaint

JUDGe ABRAMS 
Sanjay Wadhwa 
Attorney for Plaintiff 
.....,
SECURITIES AND EXCHANGE COMMISSION 
­
3 cv 8324
New York Regional Office 
' 
Brookfield Place 
200 Vesey Street, Suite 400 
New 
York, NY 10281-1022 
(212) 336-0181 
~\~ '~:\i~
UNITED STATES DISTRICT COURT ~~~~~ ~..,., J\'·.\ 
SOUTHERN DISTRICT OF NEW YORK ~ \\\\\\ro ~f.l ~~ 
-SE_C_U_RITIEN_E_X_CHANGE_C_MMISSION,~-_S_A_D_  ____   _ _O___ ___  _____,~~~~?\ 
0 
t~ '1 r~ ~)' • . ~ ••, .-• 
. ...~.,.l·;:: r..~'."~ ~r~ 
Plaintiff, 
. 
. 
~· 
~ 
-against-
COMPLAINT 
SAMMIRI, 
ECFCASE 
Defendant. 
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint 
against defendant Sam Miri ("Miri" or the "Defendant"), alleges as follows: 
SUMMARY 
1. This insider trading case involves the tipping of inside information by a 
corporate insider to a hedge fund professional. During 2008, Miri obtained material 
nonpublic information from his employer, Marvell Technology Group, Ltd. ("Marvell"), 
and tipped that information to 
AliT. Far ("Far"), the co-founder ofthe hedge fund 
advisory firm Spherix Capital LLC ("Spherix Capital"). 
2. Based on the inside information that Miri provided, Far executed trades in 
Marvell securities on behalf 
of Spherix Capital hedge funds and generated approximately 

$680,000 in illicit profits. To compensate Miri for providing Marvell information, Far 
arranged for Spherix Capital to pay Miri approximately $10,000. 
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 
3. The Commission brings this action pursuant to the authority conferred 
upon it 
by Section 21 (d) ofthe Securities Exchange Act of 1934 ("Exchange Act") [15 
U.S.C. § 78u(d)]. 
4. 
The Commission seeks permanent injunctions against the Defendant, 
enjoining him from engaging in the transactions, acts, practices, and courses 
of business 
alleged in this Complaint; disgorgement 
ofill-gotten gains, including profits and/or 
avoided losses, arising from the unlawful insider trading activity set forth 
in this 
Complaint, together with prejudgment interest; and civil penalties pursuant to Section 
21A 
of the Exchange Act [15 U.S.C. § 78u-1]. In addition, pursuant to Section 21(d)(2) 
ofthe Exchange Act [15 U.S.C. § 78u(d)(2)], the Commission seeks an order barring 
Miri from acting as 
an officer or director ofany issuer that has a class of securities 
registered pursuant to Section 12 
ofthe Exchange Act [15 U.S.C. § 781] or that is 
required to file reports pursuant to Section 15(d) 
ofthe Exchange Act [15 U.S.C. § 
78o(d)]. The Commission also seeks any other 
relief the Court may deem appropriate 
pursuant to Section 21(d)(5) ofthe Exchange Act [15 U.S.C. § 78u(d)(5)]. 
JURISDICTION AND VENUE 
5. This Court has jurisdiction over this action pursuant to Sections 21 (d), 
21(e), and 27 
ofthe Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]. 
6. Venue lies in this Court pursuant to Sections 21(d), 21A, and 27 
of the 
Exchange Act [15 U.S.C. 
§§ 78u(d), 78u-1, and 78aa]. Certain ofthe acts, practices, 
2 


transactions, and courses of business alleged in this Complaint occurred within the 
Southern District 
ofNew York. For example, Spherix Capital hedge funds used a New 
York, New York-based prime broker for clearing and settling the illegal trades 
of Marvell 
securities described in this Complaint. In addition, during the period relevant to this 
Complaint, Marvell's shares 
of common stock were quoted on the NASDAQ, which is 
headquartered in New York, New York. 
DEFENDANT 
7. Miri, age 43, resides in Palo Alto, California. During the period relevant 
to this Complaint, Miri was an employee in Marvell's communications division. 
OTHER RELEVANT INDIVIDUALS AND ENTITIES 
8. Far, age 51, resides in San Jose, California. During the period relevant to 
this Complaint, Far was a managing partner, portfolio manager and co-founder of Spherix 
Capital. 
9. Spherix Capital was a Delaware limited liability company. During the 
period relevant to this Complaint, Spherix Capital was an unregistered hedge fund 
investment adviser based 
in San Jose, California. Spherix Capital is  presently defunct. 
10. Marvell is a Bermuda corporation headquartered in Santa Clara, 
California. Marvell is a global semiconductor provider 
of microprocessor integrated 
circuits. Marvell's securities are registered with the Commission pursuant 
to Section 
12(b) 
ofthe Exchange Act and its stock trades on the Nasdaq under the symbol "MRVL." 
3 


FACTS 

The Insider Trading Scheme 
11. During 2008, Miri, who was then employed as a director of distribution in 
Marvell's communications division, obtained, among other information, detailed data 
concerning 
Marvell's sales revenues and profitability, as well as information concerning 
the company's internal predictions 
ofits future fmancial performance. 
12. Marvell considered this information to be confidential and the company 
had policies and procedures to prevent its unauthorized dissemination. Marvell's Code 
of 
Ethics, for example, stated that "[i]t is illegal to buy or sell securities using material 
information 
not available to the public" and made clear that Marvell employees were 
prohibited from using non-public Marvell information for their own personal gain, or the 
gain 
oftheir relatives or friends (including engaging in securities transactions based on 
such information). 
13. 
In addition, Marvell's Insider Trading Policy explicitly stated that no 
employee "shall disclose 
('tip') material nonpublic information to any other person" and 
instructed employees 
that "(i]fyou receive inquires about the Company from securities 
analysts
... you should decline comment, and you should direct such persons to Marvell's 
ChiefFinancial Officer." 
14. Notwithstanding his obligation to protect the confidentiality of Marvell's 
information, Miri repeatedly tipped Far, a portfolio manager at the hedge fund advisory 
firm Spherix Capital, about Marvell' s financial performance and internal financial 
projections in advance 
of such information being disseminated to the public at Marvell ' s 
regularly scheduled quarterly earnings announcements. 
4 


15. In exchange for these tips, Far arranged for Spherix Capital to pay Miri 
approximately $2,500 per quarter pursuant to a "soft dollar" arrangement. 
1 
16. On at least one occasion, Far used the information that Miri provided him 
to profitably trade Marvell securities on behalf 
of Spherix Capital hedge funds. 
17. On or about May 27, 2008, Miri told Far that Marvell, which had been 
utilizing a succession 
of interim chief financial officers, was planning to announce the 
appointment 
of a permanent chief financial officer. Miri also provided Far with 
confidential financial information that the company would be announcing at  its upcoming 
earnings announcement, scheduled to take place 
on May 29, 2008. 
18. Based on this information, Far caused Spherix Capital hedge funds to 
purchase approximately 300,000 shares ofMarvell common stock on May 27 and May 
29,2008. 
19. After the close of regular market trading on May 29, 2008 , Marvell 
announced its quarterly financial results, including quarterly revenues 
of $804 million, 
which were significantly greater than market analysts expected. As Miri had previously 
informed Far, Marvell also announced the appointment 
ofa permanent chief financial 
officer. 
1 
" Soft dollars" are created when an investment firm causes its trading activity to be 
directed through a designated broker-dealer, and, in return, the broker-dealer credits the 
investment firm with a portion 
of the commissions or fees from the executed trading 
activity. These credits can then be used to pay for goods and services consumed by the 
investment firm, such as third-party research. The investment firm can direct the broker­
dealer to pay a third-party research consultant directly (thereby utilizing the soft dollar 
credits it has accumulated with the broker-dealer). 
5 


20. Following these announcements, the price ofMarvell stock, which had 
closed at $14.
08 per share on May 29,jumped approximately 23% and closed at $17.36 
per share on May 30, 2008 . 
21. As a result 
ofthe illegal trades noted above, Spherix Capital hedge funds 
realized approximately $680,000 
in illicit profits. 
CLAIM FOR RELIEF 

Violations of Section lO(b) of the Exchange Act and Rule lOb-S Thereunder 

22. The Commission realleges and incorporates by reference paragraphs 1 
through 21, as though fully set forth herein. 
23. The information concerning Marvell's May 29, 2008 earnings 
announcement and appointment 
ofa permanent chief financial officer that Miri provided 
to Far was material and nonpublic. 
In addition, the information was considered 
confidential by Marvell, the company that was the source 
ofthe information, and Marvell 
had policies and procedures protecting confidential information. 
24. Miri learned the information that he tipped to Far as a result 
of his 
employment at Marvell. Miri knew, recklessly disregarded, or should have known that 
he owed a fiduciary duty, or obligation arising from a similar relationship 
oftrust and 
confidence, to keep the information confidential. 
25. Miri tipped Far the material nonpublic information described herein in 
knowing or reckless breach 
ofthe fiduciary duty, or obligation arising from a relationship 
of trust and confidence, that Miri owed Marvell, and did so with the expectation of 
receiving a benefit. 
6 


26. By virtue of the foregoing, Miri, in connection with the purchase or sal e of 
securities, by the use of the means or instrumentalities of interstate commerce, or of the 
mails, or a facility 
ofa national securities exchange, directly or indirectly: (a) employed 
devices, schemes or artifices to defraud; (b) made untrue statements 
of material fact or 
omitted 
to state material facts necessary in order to make the statements made, in the light 
of the circumstances under which they were made, not misleading; or (c) engaged in acts, 
practices or courses 
of business which operated or would have operated as a fraud or 
deceit upon persons. 
27. By virtue 
ofthe foregoing , Miri, directly or indirectly, violated, and, 
unless enjoined, will again violate, Section lO(b) 
ofthe Exchange Act [15 U.S.C. § 
78j(b)] and Rule 10b-5 thereunder 
[17 C.F.R. § 240.10b-5]. 
RELIEF SOUGHT 
WHEREFORE, 
the Commission respectfully requests that this Court enter a 
Final Judgment: 
I. 
Permanently restraining and enjoining defendant Miri, his officers, agents, 
servants, employees, and attorneys, and those persons in active concert or participation 
with him who receive actual notice 
of the injunction by personal service or otherwise, 
and each 
ofthem, from violating Section lO(b) ofthe Exchange Act [15 U.S.C . § 78j(b)] , 
and Rule 10b-5 thereunder [17 C.F .
R. § 240.10b-5] ; 
II. 
Ordering defendant Miri to disgorge, with prejudgment interest, all ill-gotten 
gains received, as a result 
of the conduct alleged in this Complaint; 
7 


III. 
Ordering defendant Miri to pay civil monetary penalties pursuant to Section 21A 
of the Exchange Act [15 U.S.C. § 78u-1); 
IV. 
Barring defendant Miri, pursuant to Section 21(d)(2) ofthe Exchange Act [15 
U.S.C. § 78u( d)(2)], from acting as an officer or director of any issuer that has a class of 
securities registered pursuant to Section 12 ofthe Exchange Act [15 U.S.C. § 781] or that 
is required to file reports pursuant to Section 15(d) 
ofthe Exchange Act [15 U.S.C. § 
78o(d)]; and 
v. 
Granting such other and further relief as this Court may deem just and proper. 
Dated: New York, New York 
November 21, 2013 
Of Counsel: 
Joseph Sansone ([email protected]) 
John Henderson ([email protected]) 
8 

JUDGe ABRAMS 

Sanjay Wadhwa 
Attorney for Plaintiff 

.....,SECURITIES AND EXCHANGE COMMISSION ­3 cv 8324
New York Regional Office 

' 

Brookfield Place 
200 Vesey Street, Suite 400 
New York, NY 10281-1022 
(212) 336-0181 

~\~ '~:\i~UNITED STATES DISTRICT COURT ~~~ ~~ ~..,., J\'·.\ 
SOUTHERN DISTRICT OF NEW YORK ~ \\\\\\ro ~f.l ~~ 

-SE_C_U_RITIE N_ E_X_CHANGE_C_MMISSION,~-_S_A_D_ _____ _O___________,~~~~?\ 
0 t~ ' 1 r~ ~)' • . ~ ••, .-• . ...~.,.l·;:: r..~'."~ ~r~ 

Plaintiff, . . ~· 
~ 

-against-
COMPLAINT 

SAMMIRI, ECFCASE 

Defendant. 

Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint 

against defendant Sam Miri ("Miri" or the "Defendant"), alleges as follows: 

SUMMARY 

1. This insider trading case involves the tipping of inside information by a 

corporate insider to a hedge fund professional. During 2008, Miri obtained material 

nonpublic information from his employer, Marvell Technology Group, Ltd. ("Marvell"), 

and tipped that information to AliT. Far ("Far"), the co-founder of the hedge fund 

advisory firm Spherix Capital LLC ("Spherix Capital"). 

2. Based on the inside information that Miri provided, Far executed trades in 

Marvell securities on behalf of Spherix Capital hedge funds and generated approximately 



$680,000 in illicit profits. To compensate Miri for providing Marvell information, Far 

arranged for Spherix Capital to pay Miri approximately $10,000. 

NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 

3. The Commission brings this action pursuant to the authority conferred 

upon it by Section 21 (d) ofthe Securities Exchange Act of 1934 ("Exchange Act") [15 

U.S.C. § 78u(d)]. 

4. The Commission seeks permanent injunctions against the Defendant, 

enjoining him from engaging in the transactions, acts, practices, and courses of business 

alleged in this Complaint; disgorgement of ill-gotten gains, including profits and/or 

avoided losses, arising from the unlawful insider trading activity set forth in this 

Complaint, together with prejudgment interest; and civil penalties pursuant to Section 

21A of the Exchange Act [15 U.S.C. § 78u-1]. In addition, pursuant to Section 21(d)(2) 

ofthe Exchange Act [15 U.S.C. § 78u(d)(2)], the Commission seeks an order barring 

Miri from acting as an officer or director of any issuer that has a class of securities 

registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 781] or that is 

required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 

78o(d)]. The Commission also seeks any other relief the Court may deem appropriate 

pursuant to Section 21(d)(5) ofthe Exchange Act [15 U.S.C. § 78u(d)(5)]. 

JURISDICTION AND VENUE 

5. This Court has jurisdiction over this action pursuant to Sections 21 (d), 

21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]. 

6. Venue lies in this Court pursuant to Sections 21(d), 21A, and 27 of the 

Exchange Act [15 U.S.C. §§ 78u(d), 78u-1, and 78aa]. Certain ofthe acts, practices, 

2 




transactions, and courses of business alleged in this Complaint occurred within the 

Southern District ofNew York. For example, Spherix Capital hedge funds used a New 

York, New York-based prime broker for clearing and settling the illegal trades of Marvell 

securities described in this Complaint. In addition, during the period relevant to this 

Complaint, Marvell's shares of common stock were quoted on the NASDAQ, which is 

headquartered in New York, New York. 

DEFENDANT 

7. Miri, age 43, resides in Palo Alto, California. During the period relevant 

to this Complaint, Miri was an employee in Marvell's communications division. 

OTHER RELEVANT INDIVIDUALS AND ENTITIES 

8. Far, age 51, resides in San Jose, California. During the period relevant to 

this Complaint, Far was a managing partner, portfolio manager and co-founder of Spherix 

Capital. 

9. Spherix Capital was a Delaware limited liability company. During the 

period relevant to this Complaint, Spherix Capital was an unregistered hedge fund 

investment adviser based in San Jose, California. Spherix Capital is presently defunct. 

10. Marvell is a Bermuda corporation headquartered in Santa Clara, 

California. Marvell is a global semiconductor provider of microprocessor integrated 

circuits. Marvell's securities are registered with the Commission pursuant to Section 

12(b) of the Exchange Act and its stock trades on the Nasdaq under the symbol "MRVL." 

3 




FACTS 


The Insider Trading Scheme 

11. During 2008, Miri, who was then employed as a director of distribution in 

Marvell's communications division, obtained, among other information, detailed data 

concerning Marvell's sales revenues and profitability, as well as information concerning 

the company's internal predictions of its future fmancial performance. 

12. Marvell considered this information to be confidential and the company 

had policies and procedures to prevent its unauthorized dissemination. Marvell's Code of 

Ethics, for example, stated that "[i]t is illegal to buy or sell securities using material 

information not available to the public" and made clear that Marvell employees were 

prohibited from using non-public Marvell information for their own personal gain, or the 

gain of their relatives or friends (including engaging in securities transactions based on 

such information). 

13. In addition, Marvell's Insider Trading Policy explicitly stated that no 

employee "shall disclose ('tip') material nonpublic information to any other person" and 

instructed employees that "(i]fyou receive inquires about the Company from securities 

analysts ... you should decline comment, and you should direct such persons to Marvell's 

ChiefFinancial Officer." 

14. Notwithstanding his obligation to protect the confidentiality of Marvell's 

information, Miri repeatedly tipped Far, a portfolio manager at the hedge fund advisory 

firm Spherix Capital, about Marvell ' s financial performance and internal financial 

projections in advance of such information being disseminated to the public at Marvell ' s 

regularly scheduled quarterly earnings announcements. 

4 




15. In exchange for these tips, Far arranged for Spherix Capital to pay Miri 

approximately $2,500 per quarter pursuant to a "soft dollar" arrangement. 1 

16. On at least one occasion, Far used the information that Miri provided him 

to profitably trade Marvell securities on behalf of Spherix Capital hedge funds. 

17. On or about May 27, 2008, Miri told Far that Marvell, which had been 

utilizing a succession of interim chief financial officers, was planning to announce the 

appointment of a permanent chief financial officer. Miri also provided Far with 

confidential financial information that the company would be announcing at its upcoming 

earnings announcement, scheduled to take place on May 29, 2008. 

18. Based on this information, Far caused Spherix Capital hedge funds to 

purchase approximately 300,000 shares ofMarvell common stock on May 27 and May 

29,2008. 

19. After the close of regular market trading on May 29, 2008 , Marvell 

announced its quarterly financial results, including quarterly revenues of $804 million, 

which were significantly greater than market analysts expected. As Miri had previously 

informed Far, Marvell also announced the appointment of a permanent chief financial 

officer. 

1 " Soft dollars" are created when an investment firm causes its trading activity to be 
directed through a designated broker-dealer, and, in return, the broker-dealer credits the 
investment firm with a portion of the commissions or fees from the executed trading 
activity. These credits can then be used to pay for goods and services consumed by the 
investment firm, such as third-party research. The investment firm can direct the broker­
dealer to pay a third-party research consultant directly (thereby utilizing the soft dollar 
credits it has accumulated with the broker-dealer). 

5 




20. Following these announcements, the price of Marvell stock, which had 

closed at $14.08 per share on May 29,jumped approximately 23% and closed at $17.36 

per share on May 30, 2008 . 

21. As a result ofthe illegal trades noted above, Spherix Capital hedge funds 

realized approximately $680,000 in illicit profits. 

CLAIM FOR RELIEF 


Violations of Section lO(b) of the Exchange Act and Rule lOb-S Thereunder 


22. The Commission realleges and incorporates by reference paragraphs 1 

through 21, as though fully set forth herein. 

23. The information concerning Marvell's May 29, 2008 earnings 

announcement and appointment of a permanent chief financial officer that Miri provided 

to Far was material and nonpublic. In addition, the information was considered 

confidential by Marvell, the company that was the source of the information, and Marvell 

had policies and procedures protecting confidential information. 

24. Miri learned the information that he tipped to Far as a result of his 

employment at Marvell. Miri knew, recklessly disregarded, or should have known that 

he owed a fiduciary duty, or obligation arising from a similar relationship of trust and 

confidence, to keep the information confidential. 

25. Miri tipped Far the material nonpublic information described herein in 

knowing or reckless breach of the fiduciary duty, or obligation arising from a relationship 

of trust and confidence, that Miri owed Marvell, and did so with the expectation of 

receiving a benefit. 

6 




26. By virtue of the foregoing, Miri, in connection with the purchase or sal e of 

securities, by the use of the means or instrumentalities of interstate commerce, or of the 

mails, or a facility of a national securities exchange, directly or indirectly: (a) employed 

devices, schemes or artifices to defraud; (b) made untrue statements of material fact or 

omitted to state material facts necessary in order to make the statements made, in the light 

of the circumstances under which they were made, not misleading; or (c) engaged in acts, 

practices or courses of business which operated or would have operated as a fraud or 

deceit upon persons. 

27. By virtue of the foregoing , Miri, directly or indirectly, violated, and, 

unless enjoined, will again violate, Section lO(b) ofthe Exchange Act [15 U.S.C. § 

78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

RELIEF SOUGHT 

WHEREFORE, the Commission respectfully requests that this Court enter a 

Final Judgment: 

I. 

Permanently restraining and enjoining defendant Miri, his officers, agents, 

servants, employees, and attorneys, and those persons in active concert or participation 

with him who receive actual notice of the injunction by personal service or otherwise, 

and each ofthem, from violating Section lO(b) ofthe Exchange Act [15 U.S.C . § 78j(b)] , 

and Rule 10b-5 thereunder [17 C.F .R. § 240.10b-5] ; 

II. 

Ordering defendant Miri to disgorge, with prejudgment interest, all ill-gotten 

gains received, as a result of the conduct alleged in this Complaint; 

7 




III. 

Ordering defendant Miri to pay civil monetary penalties pursuant to Section 21A 

of the Exchange Act [15 U.S.C. § 78u-1); 

IV. 

Barring defendant Miri, pursuant to Section 21(d)(2) of the Exchange Act [15 

U.S.C. § 78u( d)(2)], from acting as an officer or director of any issuer that has a class of 

securities registered pursuant to Section 12 ofthe Exchange Act [15 U.S.C. § 781] or that 

is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 

78o(d)]; and 

v. 

Granting such other and further relief as this Court may deem just and proper. 

Dated: New York, New York 
November 21, 2013 

Of Counsel: 

Joseph Sansone ([email protected]) 
John Henderson ([email protected]) 

8 


mailto:[email protected]
mailto:[email protected]