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Shocking: Former Amazon analyst fed frat brother insider info

Friend boasted on social media about trading skillz

By Thomas Claburn, 8 Sep 2017

A former financial analyst at Amazon.com pled guilty on Thursday to securities fraud for helping a former fraternity brother trade Amazon stock based on insider information.

Brett D Kennedy, 26, a resident of Blaine, Washington, acknowledged that in April 2015 he provided confidential financial information – Amazon's Q1 2015 results – to Maziar Rezakhani, 28, who used the information to buy $1.7m in Amazon stock and then sell it for more than $116,000 in profit once the report was made public.

Kennedy pled guilty to criminal charges filed by the US Department of Justice. He has also agreed to settle parallel civil charges brought by the Securities and Exchange Commission (SEC).

Rezakhani, according to the complaint [PDF] filed by the SEC, received the tip from Kennedy on April 20, 2015. In the days leading up to Amazon's April 23, 2015 report, he posted on at least two online trading sites that Amazon would beat Wall Street expectations.

After Amazon announced its quarterly results, Rezakhani sold the 4,400 shares of Amazon stock he had purchased, for a sizable profit. He then celebrated his supposed foresight with another online post. According to the complaint, he boasted the "numbers are so obvious" that a "five-year-old can guess what they will do."

Rezakhani, along with Sam Sadeghi, 28, a resident of Newcastle, Washington – who court documents describe as Rezakhani's financial trading partner and adviser – allegedly planned to take money earned from such trades to start a hedge fund in New York.

In a statement, Jina L Choi, director of the SEC's San Francisco office, mocked Rezakhani's claimed foresight: "As alleged in our complaint, Rezakhani boasted on social media that he could accurately predict Amazon's financial performance. But he failed to predict that we would catch him and his accomplices in their illegal scheme."

However, according to the Justice Department, the insider trading investigation followed from Rezakhani's involvement in an iPhone fraud scheme.

Rezakhani is currently serving a five-year prison sentence for defrauding Apple and various banks and shipping companies.

Sadeghi, not a part of the criminal case against Kennedy, has agreed – without admitting to or denying the SEC allegations – to disgorgement of about $24,000, about half of which is interest and penalty.

Kennedy, in accordance with his SEC settlement, will give back the $10,000 he was paid for the stock tip, plus about $875 in interest.

The SEC complaint against Kennedy suggests Amazon's financial system isn't as secure as it could be: "Kennedy obtained Amazon's nonpublic Q1 2015 revenue and earnings information by accessing sections of Amazon's financial database that he knew he was not authorized to access and were outside the scope of his employment responsibilities."

The Register asked Kennedy's attorney, Christopher R Black of Seattle, Washington, whether he could explain how his client was able to access data that should not have been available to him. Black declined to comment beyond offering this emailed statement:

"Mr Kennedy was little more than a kid (24) at the time of the incident, in 2015. He exercised very poor judgment in this case but it was a one-time incident; he has never engaged in any other remotely similar conduct. Since the time Mr Kennedy was initially contacted by the FBI earlier this year, he has been completely cooperative with the federal prosecutor and the SEC. He has taken responsibility for his actions and looks forward to putting this chapter in his life behind him."

Under the terms of Kennedy's plea agreement, the government will recommend that he serves no more than a year and a day in prison. The judge hearing the case, however, isn't bound to accept that recommendation and in theory could impose a sentence of as much as 20 years, with a $5m fine.

The Register asked Amazon whether it has put in place any additional security measures to prevent unauthorized access to its financial database, but the company did not respond. ®

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