SEC v. JANARDHAN NELLORE; SIVANNARAYANA BARAMA; GANAPATHI KUNADHARAJU; SABER HUSSAIN; and PRASAD MALEMPATI, No. 5:19-cv-08207, Northern District of California (Dec. 18, 2019) — Complaint

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ERIN E. SCHNEIDER (Cal. Bar No. 216114)
  [email protected]
MONIQUE C. WINKLER (Cal. Bar No. 213031)
  [email protected]
JENNIFER J. LEE (Cal. Bar No. 261399)
  [email protected]
SUSAN F. LaMARCA (Cal. Bar No. 215231)
  [email protected]
JOHN P. MOGG (Cal. Bar No. 219875)
  [email protected]
CHRISTINA N. FILIPP (Cal. Bar No. 287919)
  [email protected]

Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
44 Montgomery Street, Suite 2800
San Francisco, California 94104
Telephone:  (415) 705-2500
Facsimile:  (415) 705-2501

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

            v.

JANARDHAN NELLORE,
SIVANNARAYANA BARAMA,
GANAPATHI KUNADHARAJU,
SABER HUSSAIN, and
PRASAD MALEMPATI,

Defendants.

Case No. C-

COMPLAINT

Plaintiff Securities and Exchange Commission (the “Commission”) alleges:
SUMMARY
1. Janardhan Nellore led a ring of traders in a years-long scheme to illegally trade the
securities of Palo Alto Networks, Inc. (“PANW” or “the Company”), while he was employed at the
Company as an IT administrator.  Nellore and the other traders, all of whom were his friends,
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION

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repeatedly traded on the basis of confidential information Nellore obtained about upcoming PANW
earnings results, in order to profit when the Company publicly announced its financial results.
2. In or about 2015, Nellore learned material nonpublic information regarding PANW’s
earnings results and financial performance through his role as an IT administrator.  Nellore misused
the highly sensitive information, contrary to his commitments to PANW, in order to trade PANW
securities.  He also misused the information to repeatedly tip four of his friends – Sivannarayana
Barama, Ganapathi Kunadharaju, Saber Hussain, and Prasad Malempati – to trade PANW securities
based on the inside information.
3. At the peak of their scheme in 2017, Nellore, Barama, Kunadharaju, Hussain, and
Malempati (collectively, “Defendants”) achieved more than $7 million in illegal trading profits.
Defendants continued to trade on the basis of Nellore’s inside information through 2018, but with
mixed results.
4. Nellore closely coordinated trading among the ring members through telephone and
text communications with Barama, Kunadharaju, Hussain, and Malempati.  As a result, the traders
often placed nearly simultaneous trades in the same types of securities – usually options to buy or sell
PANW securities – before the Company announced its earnings to the market.  In addition, Nellore
used accounts associated with two of the tippees, Kunadharaju and Hussain, to surreptitiously trade
PANW securities, at times trading from his work computer at PANW.
5. Defendants used other devices to avoid detection of their scheme.  Among other
things, Nellore passed tips to the four other traders using the code word “baby” to refer to PANW.  In
addition, while using an account associated with one of the tippees to trade in PANW’s securities,
Nellore concealed his identity by impersonating the accountholder during a phone call with the
brokerage firm.  Finally, when kicking back trading profits to Nellore, two tippees made multiple
cash withdrawals slightly under the $10,000 cash transaction reporting limits, in an attempt to limit
bank scrutiny.
JURISDICTION AND VENUE
6. The Commission brings this action pursuant to Sections 21(d) and 21A of the
Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d) and 78u-1.

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7. This Court has jurisdiction over this action pursuant to Sections 21(d), 21A, and 27 of
the Exchange Act, 15 U.S.C. §§ 78u(d), 78u-1 and 78aa.
8. Defendants, directly or indirectly, made use of the means or instrumentalities of
interstate commerce, and of the mails, and of the facilities of a national securities exchange, in
connection with the transactions, acts, practices and courses of business alleged herein.
9. Venue in this District is proper pursuant to Section 27 of the Exchange Act, 15 U.S.C.
§ 78aa, because a substantial part of the acts and transactions constituting the violations alleged in
this Complaint occurred within the Northern District of California.
INTRADISTRICT ASSIGNMENT
10. Under Civil Local Rule 3-2(e), this civil action should be assigned to the San Jose
Division, because a substantial part of the events which give rise to the claims alleged herein
occurred in Santa Clara County.
DEFENDANTS
11. Janardhan Nellore is 42 years old, and until his arrest by the Federal Bureau of
Investigation in May 2019, resided in Milpitas, California.  Nellore joined PANW as an IT
administrator in 2012.  Beginning in 2015, Nellore held a management position within PANW’s IT
group.  On May 9, 2019, the U.S. Attorney’s Office for the Northern District of California filed a
criminal complaint against Nellore for aggravated identity theft under 18 U.S.C. § 1028A, in
connection with Nellore’s use of another individual’s brokerage account to trade in PANW securities.
The September 19, 2019 indictment against Nellore charged him with aggravated identity theft
during and in relation to a felony violation of attempt and conspiracy to commit securities fraud
under 18 U.S.C. § 1349.
12. Sivannarayana Barama is 45 years old and resides in Fremont, California.  Barama
works as a software engineer in Santa Clara, California.  In 2015 and 2016, Barama worked as a
contractor for PANW and interacted with PANW’s IT group, where he and Nellore became friends
and discussed their shared interest in securities trading.
13. Ganapathi Kunadharaju is 41 years old and resides in San Ramon, California.
Kunadharaju works as a software engineer in Santa Clara, California.  Kunadharaju became friends

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with Nellore when they attended college in India, and they maintained a close friendship while living
in California.  Nellore and Kunadharaju have financial ties, and transferred thousands of dollars
between each other during the past several years.
14. Saber Hussain is 42 years old and resides in Santa Clara, California.  Hussain works as
an IT consultant in Santa Clara, California.  During 2012, Hussain worked as a contractor for PANW,
where he became friends with Nellore.  Nellore and Hussain have financial ties, and transferred
thousands of dollars between each other during the past several years.
15. Prasad Malempati is 50 years old and resides in Cupertino, California.  Malempati was
employed at PANW in the IT group, where he became friends with Nellore, from 2013 until 2016.
RELEVANT ENTITY
16. Palo Alto Networks, Inc. is a Delaware corporation headquartered in Santa Clara,
California.  PANW is a cloud-computing security firm that offers customers a security operating
platform.  PANW’s common stock is registered with the Commission pursuant to Section 12(b) of
the Exchange Act, and its securities are traded on the New York Stock Exchange under the ticker
symbol “PANW.”  PANW’s fiscal year closes on July 31 of each calendar year.
FACTUAL ALLEGATIONS
A. Nellore Gains Access to Material Nonpublic Information Regarding PANW
17. Nellore was employed by PANW as an IT administrator responsible for supporting the
company’s internal financial databases.  In 2015, Nellore was promoted within PANW’s IT
department and became entrusted with the highest level of permissions and access to the Company’s
database responsible for generating information related to revenue, which was restricted and
monitored for access.  This database – which was referred to internally as the Systems, Applications
& Products in Data Processing (“SAP”) database – was essential to the process by which PANW
determined its quarterly financial results, such as revenue, so that it could report those results
publicly, including in SEC filings (the “financial close process”).
18. In his position as an IT administrator, Nellore became one of only five individuals at
PANW with the highest level of access to the SAP database, known as the “SAP Admin Group.”
Nellore repeatedly accessed confidential information within the SAP database and other Company

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systems while assisting the financial close process, which typically began approximately six weeks
before the Company’s public earnings announcement.  As part of his job function, Nellore also
regularly learned confidential information related to PANW’s earnings, including its revenue
numbers, from business colleagues who were working on the financial close process.
19. Accordingly, by virtue of his role at PANW, beginning no later than 2015 until his
employment was terminated in 2019, Nellore acquired material nonpublic information regarding
PANW’s earnings and financial performance for each quarter, well before the Company’s public
earnings announcement.
20. Nellore’s level of access to material nonpublic information at PANW came with
additional obligations.  He was thus subject to several corporate policies that obligated him to
maintain the confidentiality of information he obtained through his employment.
21. For instance, beginning in or about 2012, Nellore was subject to PANW’s insider
trading policy, which prohibited him from trading on, or disclosing to others, nonpublic information
regarding PANW’s “[f]inancial results, financial condition, earnings pre-announcements, guidance,
projections or forecasts, particularly if inconsistent with the Company’s guidance or the expectations
of the investment community[,]” for which he received Company training.  Nellore was also subject
to PANW’s employee handbook, which prohibited him from disclosing information regarding
PANW’s “financial records” to “any unauthorized person inside or outside the company.”
22. Given his high level of access, Nellore was also subject to quarterly trading “blackout”
periods, during which PANW’s policy prohibited him from placing any trades to buy or sell PANW’s
securities.  Typically, the blackout periods began with the second Monday of the last month of each
quarter, and lasted until the end of the second full trading day after PANW publicly announced its
earnings.  Nellore received blackout reminder emails to this effect during each quarter.
B. Defendants’ Scheme to Trade PANW on Inside Information
23. Despite the duties he owed to his employer, Nellore embarked on an insider trading
scheme, by no later than 2015, in which he traded PANW securities on the basis of material
nonpublic information he obtained from his employer, and passed this information as gifts of
confidential information to four tippees, each of whom was his friend, for the purpose of trading

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PANW securities.  Nellore also made separate tipping arrangements with the tippees, further allowing
Nellore to benefit from trading on the basis of the material nonpublic information he learned from his
work at PANW.
Nellore’s Tipping Arrangements with Each of the Tippees
24. By 2015, Nellore convinced Kunadharaju to grant Nellore electronic access to
accounts opened in Kunadharaju’s name so that Nellore could place trades in those accounts.  Nellore
explained to Kunadharaju that he would use Kunadharaju’s account to conceal the fact that Nellore
was the source of the trading decisions.  In addition, Nellore convinced Kunadharaju to open an
account in Kunadharaju’s wife’s name, and to give Nellore electronic access to the wife’s account so
that Nellore could place trades in that account.  Nellore at times added money to Kunadharaju’s and
Kunadharaju’s wife’s brokerage accounts, as did Kunadharaju.
25. In exchange for allowing Nellore access to trade in the accounts, Kunadharaju agreed
that Kunadharaju would keep the profits of PANW trading that Nellore conducted with
Kunadharaju’s funds, while Nellore would take the profits from trading that Nellore funded.  Nellore
additionally tipped Kunadharaju to place the same trades as Nellore, to enable him to further profit
from the inside information.  Kunadharaju withdrew cash in amounts under $10,000 to kick back
profits to Nellore.
26. By 2015, Nellore also convinced Hussain to grant Nellore electronic access to at least
one account opened in Hussain’s name so that Nellore could place trades in that account.  Nellore
explained to Hussain that he would use Hussain’s account to conceal the fact that Nellore was the
source of the trading decisions.  In exchange for Nellore’s use of Hussain’s account to trade PANW
securities, Hussain agreed that Hussain would keep the profits of PANW trading that Nellore
conducted with Hussain’s funds, while Nellore would take the profits from trading that Nellore
funded.  Nellore also tipped Hussain to trade profitably in PANW securities based on Nellore’s inside
information.  Hussain withdrew cash in amounts under $10,000 to kick back profits to Nellore.
27. In a different arrangement, Nellore also regularly tipped Malempati to trade profitably
in PANW securities based on Nellore’s inside information.  In exchange for the tips, Malempati, who
had studied stock trading, provided his stock research regarding PANW’s anticipated stock price

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movements to Nellore.  The purpose of these analyses was to help Nellore form a trading strategy.
28. Nellore also regularly tipped Barama to trade in PANW securities based on Nellore’s
inside information.  Nellore provided these tips as gifts to Barama in the context of their friendship.
As one example of their mutual trust, Nellore asked Barama on one occasion for a cash loan and
offered to pay Barama back in India; Barama indicated a willingness to oblige the request.
29. As another example of their close ties, Barama relied on Nellore for investing advice.
Accordingly, Nellore acted as Barama’s instructor in telling him how to trade, and frequently asked
Barama about the magnitude of Barama’s trading and account balance.  Throughout the relevant time
period, Nellore and Barama frequently discussed securities trading in communications via text
messages and phone calls and when they met, including at their shared place of worship.
Nellore’s Tips of Inside Information
30. Nellore’s tips of inside information about PANW’s financial results were integral to
the four tippees’ decisions to trade in PANW securities.  Indeed, the tippees often traded shortly after
communicating with Nellore, and often within minutes or hours of each other.  Defendants, including
Nellore, typically traded options on PANW securities, each typically making a consistent bet that
PANW’s shares would ultimately rise or fall on the information about the Company’s earnings that
Nellore had obtained.
31. Throughout the scheme, Nellore passed tips of inside information regarding PANW to
the four tippees, Barama, Kunadharaju, Hussain, and Malempati, in person, during phone calls, and in
text messages.  At times, Nellore communicated important information about PANW’s likelihood of
achieving projected revenue targets, including the revenue PANW earned during a given quarter,
before the Company announced publicly the same information.  Nellore also recommended specific
trading strategies – particularly involving trading options on PANW’s common stock – by, for
instance, instructing the tippees to buy or sell call options or put options, and to buy or sell options at
a specific strike price (or range).
32. At Nellore’s direction, the ring employed options trading in order to place larger
“bets” on the basis of the inside information Nellore supplied.  Options contracts offer a trader
varying degrees of potential for risk and profit.  Options can be significantly cheaper to purchase than

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common stock, allowing a trader to open a larger position in options than he could in stock, while
magnifying the potential profits (and the potential risks of losses) from a trade.
33. Nellore and the other traders frequently referred to PANW as the code word “baby” in
texts and emails when discussing tips and trades to further mask their communications.  For example,
when Malempati sent Nellore a text, “Sold half of PANW,” Nellore promptly urged Malempati to use
the code word instead, saying, “It’s baby,” after which Malempati used the code word.  Nellore
regularly referred to PANW as “baby” in his communications, including during text messages to
Barama with advice such as “exit baby,” and “enter few baby.”  In contrast, when discussing
securities other than PANW, Nellore and the other traders did not use code words.
34. At times, Nellore discussed with the tippees the particular inside information, and at
other times he told them how to trade based on the information.  For instance, Nellore told Barama in
texts “we know the numbers,” and “strong numbers expected.”
Defendants Trade Based on Inside Information from Nellore
35. Beginning in or about 2015, Nellore and his tippees traded in advance of several
PANW earnings announcements based on inside information sourced from Nellore.  The Appendix
identifies Defendants’ illegal PANW trades ahead of PANW earnings announcements, and the
relevant accounts in which these trades were placed.
36. Nellore’s tips were highly lucrative to the ring.  At the scheme’s peak in 2017,
Defendants achieved approximately $7 million in profits from unlawful trading in advance of
PANW’s public earnings announcements.  Defendants continued to trade PANW securities through
2018 – with mixed success – on the inside information sourced from Nellore.
37. The following examples demonstrate the Defendants’ insider trading on the basis of
Nellore’s material nonpublic information.
Defendants’ Insider Trading in Advance of PANW’s November 21, 2016 Announcement
38. Through his IT administrative privileges, and in discussions with business colleagues
related to the financial close, Nellore acquired confidential information indicating that PANW’s
earnings and financial performance for Q1 2017 (closed October 31, 2017) would be disappointing
and likely surprise the market.

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39. On the evening of November 16, 2016, just five days before PANW’s public earnings
announcement, Nellore spoke by telephone for several minutes, first with Barama and then with
Kunadharaju.
40. The very next morning, November 17, 2016, Defendants Nellore, Barama and
Kunadharaju began purchasing PANW “put options” – designed to capitalize on the material
nonpublic information Nellore had.  Both Nellore and Kunadharaju placed trades in Kunadharaju’s
accounts.  The purchaser of a PANW put option has the right (but not the obligation) to sell PANW
shares at the specified “strike” price, before the stated expiration date of the option.  By purchasing
put options, the traders were betting that the price of PANW’s shares would decline below the strike
price before the options expired.
41. Beginning at approximately 6:41 a.m. on November 17, 2016, Barama placed an order
to buy PANW put options at a cost of approximately $72,000.  His order was followed closely,
beginning at approximately 6:43 a.m., by orders placed by Nellore to buy PANW put options for an
account in Kunadharaju’s name, at a cost of approximately $14,000.  Before approximately
7:04 a.m., Barama also continued to purchase PANW put options, spending an additional
approximately $51,000.  After these trades were placed, Nellore again communicated by telephone
for several minutes that morning, first with Barama and then with Kunadharaju.  After those calls, at
approximately 11:22 a.m., orders to purchase additional put options were placed in Kunadharaju’s
account at an approximate cost of $3,000.
42. On November 21, 2016, shortly after 1:00 p.m., PANW publicly announced its
Q1 2017 earnings, revealing disappointing results for the Company.  By the end of the next day, the
stock price had declined precipitously, closing roughly 13% lower than the prior day’s closing price.
43. Defendants Nellore, Barama and Kunadharaju sold the put options between November
21 and 23, 2016, profiting by more than $200,000.
Defendants’ Insider Trading in Advance of PANW’s February 28, 2017 Announcement
44. Through his IT administrative privileges, and in discussions with business colleagues
related to the financial close, Nellore acquired confidential information indicating that PANW’s
earnings and financial performance for Q2 2017 (closed January 31, 2017) would be disappointing

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and would likely surprise the market.
45. During the final weeks before PANW’s public announcement of its earnings, Nellore
had several conversations with Barama, Kunadharaju, Hussain, and Malempati, and each of them
placed trades in their brokerage accounts that were designed to profit if the market price of PANW’s
securities fell after the earnings announcement.  At the time, Nellore was aware that PANW’s
revenue results would disappoint and likely surprise the market.
46. On the morning of February 8, 2017, Nellore and Malempati communicated twice by
telephone for several minutes.  About two hours after the second call, at approximately 11:18 a.m.,
Malempati placed an order to purchase PANW put options.  Later that day, Nellore and Malempati
spoke again by telephone for an approximately 24:06 minute call.
47. On February 20, 2017, Nellore and Hussain communicated by telephone for an
approximately 9:35 minute call.  On February 21, 2017, Nellore and Hussain communicated by
telephone; hours later, orders to purchase PANW put options were placed in Hussain’s account.
48. On February 28, 2017, PANW announced its earnings shortly after 1:00 p.m.  In the
time period leading up to that announcement, Nellore spoke with Barama and Kunadharaju, and each
traded.  Thus, beginning at approximately 9:06 a.m., Nellore and Kunadharaju spoke by telephone for
approximately 25:00 minutes.  At approximately 10:26 a.m., Nellore and Barama communicated by
telephone for approximately 1:28 minutes.  Then, from around 10:29 a.m. through 12:53 p.m.,
Nellore, Barama, and Kunadharaju each placed trades.
49. Following their calls on the morning of February 28, just before the public
announcement of PANW’s earnings, between approximately 10:29 a.m. and 12:53 p.m., Kunadharaju
purchased PANW put options at an approximate cost of $15,000.  During this time, beginning at
approximately 11:32 a.m., Nellore and Kunadharaju again spoke by telephone for approximately
14:36 minutes.  Just as their call ended, an order was placed in Kunadharaju’s wife’s account to buy
PANW put options at an approximate cost of $3,000.  Nellore and Kunadharaju initiated an
approximately 43:01 minute call at 12:46 p.m., and during this call, at approximately 12:53 p.m.
(12:00 minutes before PANW’s earnings announcement), an order was placed in Kunadharaju’s
wife’s account to buy PANW put options at an approximate cost of $1,100.

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50. Similarly, beginning at approximately 11:30 a.m. through 12:25 p.m. on February 28,
Barama placed orders to buy PANW put options.  In the first order, Barama spent approximately
$37,000 buying put options.  Barama then placed additional, larger orders to buy PANW put options
at an approximate cost of $176,000.  While Barama’s orders were being placed and filled, beginning
at approximately 11:59 a.m., Barama again communicated by telephone with Nellore for
approximately 2:25 minutes.  After that phone call, Barama spent another approximately $26,000 on
PANW put options.
51. On February 28, before the public announcement of PANW’s earnings, Nellore also
placed an order to buy PANW put options in his own account, at an approximate cost of $2,400.
52. Hours after PANW’s February 28 earnings announcement, Nellore again
communicated with each of the tippees by telephone in quick succession.  Beginning at
approximately 1:36 p.m., Nellore and Barama had an approximately 2:33 minute call.  Immediately
after, at approximately 1:38 p.m., Nellore and Malempati had an approximately 6:37 minute call.
Less than an hour later, at approximately 2:25 p.m., Nellore and Kunadharaju had an approximately
3:08 minute call.  Finally, beginning at approximately 6:22 p.m., Nellore and Hussain spoke for
approximately 9:46 minutes.
53. The next business day, each of the traders began to profitably sell their positions in
PANW put options.  By the end of the day, PANW’s stock price had closed more than 24% below the
prior day’s closing price.  Accordingly, Defendants’ unlawful trades in put options ahead of the
February earnings announcement generated significant profits for them, which exceeded $1 million.
54. On March 14, 2017, in order to funnel trading profits to Nellore, Kunadharaju
withdrew from his bank account $9,500.  Kunadharaju then provided $9,500 in cash to Nellore, who
deposited the cash into his own bank account on the same day.
 Defendants’ Insider Trading in Advance of PANW’s May 31, 2017 Announcement
55. Through his IT administrative privileges, and in discussions with business colleagues
related to the financial close, Nellore acquired confidential information indicating that PANW’s
earnings and financial performance for Q3 2017 (closed April 30, 2017) would exceed expectations
and would likely surprise the market.

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56. On May 31, 2017, PANW announced its earnings publicly.  As he had done in earlier
quarters, Nellore tipped Barama, Kunadharaju, Hussain, and Malempati to trade on inside
information he acquired from PANW in the weeks preceding the earnings announcement through
communications in person, by telephone, and by other means.
57. Furthermore, each of the Defendants traded on the information supplied by Nellore,
buying “call options” in a highly coordinated manner, just ahead of PANW’s public announcement.
The purchaser of a PANW call option has the right (but not the obligation) to buy PANW shares at
the specified “strike” price, before the stated expiration date of the option.  By purchasing call
options, the traders were betting that the price of PANW’s shares would increase above the strike
price before the options expired.
58.   On May 30, 2017, the day before the earnings announcement, beginning at
approximately 6:37 a.m., each of the Defendants initiated trades to buy PANW call options in quick
succession.  First, beginning at approximately 6:37 a.m., orders to purchase PANW call options were
placed in Hussain’s account.  About one minute later, Nellore began placing orders to buy call
options in one of Kunadharaju’s accounts; nearly simultaneously, Kunadharaju placed orders to buy
PANW call options in another of Kunadharaju’s accounts.  Then, beginning at approximately 6:50
a.m., Nellore placed orders to buy PANW call options in his own account.
59. Later that morning, Nellore communicated with Kunadharaju, Barama, and
Malempati, and each of the tippees placed orders to buy PANW call options.  Thus, between
approximately 8:00 a.m. and 8:40 a.m., Kunadharaju placed orders to buy PANW call options; during
this time, Kunadharaju and Nellore communicated by telephone in three separate calls for
approximately 1:13, 8:25, and 8:19 minutes.  During each of the approximately 8 minute calls
between Kunadharaju and Nellore, Kunadharaju placed orders to buy PANW call options.
60. Similarly, at approximately 8:45 a.m. on May 30, Nellore communicated with Barama
by telephone for approximately 1:42 minutes.  Then, beginning at approximately 9:00 a.m., Barama
placed orders to buy PANW call options, at an approximate cost of nearly $250,000.  Barama texted
Nellore at approximately 9:21 a.m. to ask, “Baby ok?” and “Call me when u free” to which Nellore
replied the same morning, “No problem keep adding[.]”

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OMPLAINT

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61. Finally, beginning at approximately 9:48 a.m. on May 30, Malempati placed orders to
buy PANW call options; Malempati called Nellore, and Nellore returned the call and spoke with
Malempati for approximately 8:00 minutes within about one hour of these trades.  Later that day,
Nellore spoke again via telephone with Hussain, Kunadharaju, and Barama.
62. PANW publicly announced its earnings on May 31, 2017 at approximately 1:00 p.m.
Within hours, Nellore was again in contact with each of the tippees.  First, Nellore and Kunadharaju
spoke for a total of approximately 15 minutes during three calls from 1:29 p.m. through 2:02 p.m.
Then, Nellore and Malempati communicated by text message at approximately 2:06 p.m.  Later,
Nellore and Hussain spoke at approximately 5:35 p.m. for 9:28 minutes, followed shortly after by
another call between Nellore and Kunadharaju at approximately 5:45 p.m. for 11:50 minutes, and a
call between Nellore and Barama at approximately 5:59 p.m. for 5:17 minutes.
63. The day after the announcement, June 1, 2017, each of the traders began to sell their
PANW call options for a profit.  As PANW’s stock price closed at the end of the day about 17%
higher than the prior day’s closing price, Defendants’ trades in advance of the announcement
generated profits that exceeded $3 million.
64. On June 13, 2017, in order to funnel trading profits to Nellore, Kunadharaju’s wife
withdrew $9,500 from her bank account.  Kunadharaju then provided $9,500 in cash to Nellore, who
deposited the cash into his own bank account the same day.
C.  Defendants Acted Intentionally
65. Nellore knowingly or recklessly traded on the basis of material nonpublic information
and tipped Barama, Kunadharaju, Hussain, and Malempati to trade as well.
66. At the time of the trading described above, Nellore knew, or should have known, that
the information he acquired at PANW regarding its earnings and financial performance was material
and nonpublic, and that he had a duty to his employer to keep such information confidential.  Nellore
knew or was reckless in not knowing that he owed PANW a fiduciary duty, or an obligation arising
from a similar relationship of trust or confidence, to keep this information confidential.
67. In particular, Nellore was aware of several restrictions prohibiting him from trading,
or tipping others to trade, based on the confidential PANW information, including but not limited to

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OMPLAINT

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the Company’s insider trading policy and its trading blackout periods.
68. In receiving insider trading tips from Nellore, Barama, Kunadharaju, Hussain, and
Malempati each knew, or were reckless in not knowing, that the information Nellore conveyed
regarding PANW was material nonpublic information and that they should not trade on such
information.
69. In addition, Barama, Kunadharaju, Hussain, and Malempati knew, were reckless in not
knowing, or consciously avoided knowing, that the material nonpublic information was disclosed by
Nellore in breach of a fiduciary duty or obligation arising from a relationship of trust or confidence.
70. At the time of the trading described above, Defendants each acted with deceptive
intent.  As Nellore revealed to both Kunadharaju and Hussain, he used their accounts to trade in
PANW securities in order to mask the fact that Nellore was the source of the trading decisions.
Nellore also took affirmative steps to conceal his identity and ability to make trades in these accounts.
For example, in or about February 2018, Nellore used his cell phone to call Hussain’s brokerage firm
to place a trade in PANW securities in Hussain’s account; during the call, Nellore identified himself
as Hussain, and provided personal details regarding Hussain, in order to surreptitiously obtain access
to the account.
71. Nellore and the other traders also frequently used the code word “baby” in texts and
emails when discussing tips and trades, to further mask their communications.  In contrast, when
discussing securities other than PANW, Nellore and the other traders did not use code words.
72. Defendants also used devices to disguise kickbacks paid to Nellore in exchange for his
tips or to send him his profits from trading.  For instance, Hussain and Kunadharaju each withdrew
cash in amounts just below the legal limits for law enforcement reporting to pass the money to
Nellore without having to explain the reasons or details for the withdrawals to the financial
institutions where they held accounts.
73. Ultimately, upon learning about law enforcement inquiries into his trading and tipping,
Nellore made plans to leave
 the United States.  On or about May 7, 2019, agents from the Federal
Bureau of Investigation approached Nellore, to discuss, among other things, his trading in PANW
securities.

C
OMPLAINT

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74. Sometime after the interview, Nellore secured one-way flight tickets for himself and
his family to India.  The FBI intercepted Nellore at the airport on May 8, 2019 while he was trying to
board the flight.
FIRST CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Against All Defendants)
75. Paragraphs 1 through 74 are hereby re-alleged and are incorporated herein by
reference.
76. Nellore had a duty to keep material nonpublic information that he acquired from
PANW confidential.  Information about PANW’s earnings and financial performance was maintained
as confidential by PANW, which had policies to protect its confidential information.  Nellore learned
the information about PANW’s earnings and financial performance as a result of his employment at
PANW, and thus knew, or recklessly disregarded, that he owed a fiduciary duty, or an obligation
arising from a similar relationship of trust and confidence, to PANW to keep the information
confidential and to refrain from trading and from tipping the information to others.  In breach of that
duty, Nellore traded on the basis of the material nonpublic information and he knowingly or
recklessly communicated material nonpublic information to others so that they could trade securities
on the basis of the information.  Nellore communicated material nonpublic information to others in
exchange for personal benefits, or with the expectation of receiving a benefit.
77. Barama, Kunadharaju, Hussain, and Malempati knowingly or recklessly traded on the
basis of material nonpublic information from Nellore.  Barama, Kunadharaju, Hussain, and
Malempati knew, were reckless in not knowing, should have known, or consciously avoided knowing
that the material nonpublic information from Nellore was disclosed in breach of a fiduciary duty or
obligation arising from a relationship of trust or confidence.
78. By engaging in the conduct described above, Nellore, Barama, Kunadharaju, Hussain,
and Malempati, with scienter, in connection with the purchase or sale of securities as set forth above,
directly or indirectly:
a. employed devices, schemes, or artifices to defraud;

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OMPLAINT

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b. made untrue statements of material facts and omitted to state material facts necessary
in order to make the statements made, in light of the circumstances under which they
were made, not misleading; and
c. engaged in acts, practices, and courses of business which operated or would operate as
a fraud or deceit upon other persons, including purchasers and sellers of securities;
by the use of the means or instrumentalities of interstate commerce, and of the mails, and the
facilities of a national securities exchange.
79. By reason of the foregoing, Nellore, Barama, Kunadharaju, Hussain, and Malempati
violated, and unless restrained and enjoined will continue to violate, Section 10(b) of the Exchange
Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
SECOND CLAIM FOR RELIEF
Aiding and Abetting Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Against Defendants Barama, Kunadharaju, Hussain, and Malempati)
80. Paragraphs 1 through 74 are hereby re-alleged and are incorporated herein by
reference.
81. By engaging in the conduct described above, Barama, Kunadharaju, Hussain, and
Malempati, each knowingly or recklessly provided substantial assistance to Nellore, who knowingly
or recklessly, in connection with the purchase or sale of securities as set forth above, directly or
indirectly:
a. employed devices, schemes, or artifices to defraud;
b. made untrue statements of material facts and omitted to state material facts necessary
in order to make the statements made, in light of the circumstances under which they
were made, not misleading; and
c. engaged in acts, practices, and courses of business which operated or would operate as
a fraud or deceit upon other persons, including purchasers and sellers of securities;
by the use of the means or instrumentalities of interstate commerce, and of the mails, and the
facilities of a national securities exchange.
82. By reason of the foregoing, Barama, Kunadharaju, Hussain, and Malempati, directly

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OMPLAINT

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or indirectly, singly or in concert, aided and abetted violations of, and unless restrained and enjoined
will continue to violate,  Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5
thereunder, 17 C.F.R. § 240.10b-5.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court enter a judgment:
I.
Finding that Defendants violated Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and
Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
II.
Permanently restraining and enjoining Defendants, their officers, agents, servants, employees,
and attorneys, and those persons in active concert or participation with them who receive actual
notice of the injunction by personal service or otherwise, from directly or indirectly violating Section
10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
III.
Ordering Defendants to disgorge, with prejudgment interest, all illicit trading profits, losses
avoided, or other ill-gotten gains received by them, directly or indirectly, as a result of the conduct
alleged herein.
IV.
Ordering Defendants to pay civil penalties pursuant to Section 21A of the Exchange Act,
15 U.S.C. § 78u-l.
//
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OMPLAINT

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V.
Granting such other relief as this Court may deem just and appropriate.

Dated: December 17, 2019        Respectfully submitted,

/S/ Christina N. Filipp

Christina N. Filipp
Attorney for Plaintiff
SECURITIES AND EXCHANGE
COMMISSION

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 Appendix

1
 Accounts referenced include both personal and spousal accounts of the Defendants.

PANW Earnings
Announcement

Accounts Placing Illegal Trades in PANW Securities
1

Nellore
(Insider)
Barama
(Tippee)
Kunadharaju
(Tippee)
Hussain
(Tippee)
Malempati
(Tippee)
Nov. 23, 2015 (1Q16)  X X X
Feb. 25, 2016 (2Q16)  X  X
May 26, 2016 (3Q16)
Aug. 30, 2016 (4Q16)  X X
Nov. 21, 2016 (1Q17)  X X
Feb. 28, 2017 (2Q17) X X X X X
May 31, 2017 (3Q17) X X X X X
Aug. 31, 2017 (4Q17)  X X X X
Nov. 20, 2017 (1Q18)  X X X X
Feb. 26, 2018 (2Q18) X X X X X
June 4, 2018 (3Q18)  X X  X
Sept. 6, 2018 (4Q18)  X X X X

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ERIN E. SCHNEIDER (Cal. Bar No. 216114) 
  [email protected] 
MONIQUE C. WINKLER (Cal. Bar No. 213031) 
  [email protected]  
JENNIFER J. LEE (Cal. Bar No. 261399) 
  [email protected] 
SUSAN F. LaMARCA (Cal. Bar No. 215231) 
  [email protected] 
JOHN P. MOGG (Cal. Bar No. 219875) 
  [email protected] 
CHRISTINA N. FILIPP (Cal. Bar No. 287919) 
  [email protected] 
 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
44 Montgomery Street, Suite 2800 
San Francisco, California 94104 
Telephone:  (415) 705-2500  
Facsimile:  (415) 705-2501 
 
 
 

SECURITIES AND EXCHANGE COMMISSION, 
 

Plaintiff, 
 
 v. 
 
JANARDHAN NELLORE,  
SIVANNARAYANA BARAMA,  
GANAPATHI KUNADHARAJU, 
SABER HUSSAIN, and 
PRASAD MALEMPATI,  
 

Defendants. 
 

 

Case No. C- 
 
 
 
COMPLAINT  
 
 
 

 
Plaintiff Securities and Exchange Commission (the “Commission”) alleges: 

SUMMARY 

1. Janardhan Nellore led a ring of traders in a years-long scheme to illegally trade the 

securities of Palo Alto Networks, Inc. (“PANW” or “the Company”), while he was employed at the 

Company as an IT administrator.  Nellore and the other traders, all of whom were his friends, 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

Case 5:19-cv-08207   Document 1   Filed 12/17/19   Page 1 of 19



 
 

COMPLAINT 
 

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repeatedly traded on the basis of confidential information Nellore obtained about upcoming PANW 

earnings results, in order to profit when the Company publicly announced its financial results.   

2. In or about 2015, Nellore learned material nonpublic information regarding PANW’s 

earnings results and financial performance through his role as an IT administrator.  Nellore misused 

the highly sensitive information, contrary to his commitments to PANW, in order to trade PANW 

securities.  He also misused the information to repeatedly tip four of his friends – Sivannarayana 

Barama, Ganapathi Kunadharaju, Saber Hussain, and Prasad Malempati – to trade PANW securities 

based on the inside information.   

3. At the peak of their scheme in 2017, Nellore, Barama, Kunadharaju, Hussain, and 

Malempati (collectively, “Defendants”) achieved more than $7 million in illegal trading profits.  

Defendants continued to trade on the basis of Nellore’s inside information through 2018, but with 

mixed results.   

4. Nellore closely coordinated trading among the ring members through telephone and 

text communications with Barama, Kunadharaju, Hussain, and Malempati.  As a result, the traders 

often placed nearly simultaneous trades in the same types of securities – usually options to buy or sell 

PANW securities – before the Company announced its earnings to the market.  In addition, Nellore 

used accounts associated with two of the tippees, Kunadharaju and Hussain, to surreptitiously trade 

PANW securities, at times trading from his work computer at PANW.     

5. Defendants used other devices to avoid detection of their scheme.  Among other 

things, Nellore passed tips to the four other traders using the code word “baby” to refer to PANW.  In 

addition, while using an account associated with one of the tippees to trade in PANW’s securities, 

Nellore concealed his identity by impersonating the accountholder during a phone call with the 

brokerage firm.  Finally, when kicking back trading profits to Nellore, two tippees made multiple 

cash withdrawals slightly under the $10,000 cash transaction reporting limits, in an attempt to limit 

bank scrutiny.   

JURISDICTION AND VENUE 

6. The Commission brings this action pursuant to Sections 21(d) and 21A of the 

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d) and 78u-1. 

Case 5:19-cv-08207   Document 1   Filed 12/17/19   Page 2 of 19



 
 

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7. This Court has jurisdiction over this action pursuant to Sections 21(d), 21A, and 27 of 

the Exchange Act, 15 U.S.C. §§ 78u(d), 78u-1 and 78aa. 

8. Defendants, directly or indirectly, made use of the means or instrumentalities of 

interstate commerce, and of the mails, and of the facilities of a national securities exchange, in 

connection with the transactions, acts, practices and courses of business alleged herein.   

9. Venue in this District is proper pursuant to Section 27 of the Exchange Act, 15 U.S.C. 

§ 78aa, because a substantial part of the acts and transactions constituting the violations alleged in 

this Complaint occurred within the Northern District of California. 

INTRADISTRICT ASSIGNMENT 

10. Under Civil Local Rule 3-2(e), this civil action should be assigned to the San Jose 

Division, because a substantial part of the events which give rise to the claims alleged herein 

occurred in Santa Clara County. 

DEFENDANTS 

11. Janardhan Nellore is 42 years old, and until his arrest by the Federal Bureau of 

Investigation in May 2019, resided in Milpitas, California.  Nellore joined PANW as an IT 

administrator in 2012.  Beginning in 2015, Nellore held a management position within PANW’s IT 

group.  On May 9, 2019, the U.S. Attorney’s Office for the Northern District of California filed a 

criminal complaint against Nellore for aggravated identity theft under 18 U.S.C. § 1028A, in 

connection with Nellore’s use of another individual’s brokerage account to trade in PANW securities.  

The September 19, 2019 indictment against Nellore charged him with aggravated identity theft 

during and in relation to a felony violation of attempt and conspiracy to commit securities fraud 

under 18 U.S.C. § 1349.  

12. Sivannarayana Barama is 45 years old and resides in Fremont, California.  Barama 

works as a software engineer in Santa Clara, California.  In 2015 and 2016, Barama worked as a 

contractor for PANW and interacted with PANW’s IT group, where he and Nellore became friends 

and discussed their shared interest in securities trading. 

13. Ganapathi Kunadharaju is 41 years old and resides in San Ramon, California.  

Kunadharaju works as a software engineer in Santa Clara, California.  Kunadharaju became friends 

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with Nellore when they attended college in India, and they maintained a close friendship while living 

in California.  Nellore and Kunadharaju have financial ties, and transferred thousands of dollars 

between each other during the past several years.   

14. Saber Hussain is 42 years old and resides in Santa Clara, California.  Hussain works as 

an IT consultant in Santa Clara, California.  During 2012, Hussain worked as a contractor for PANW, 

where he became friends with Nellore.  Nellore and Hussain have financial ties, and transferred 

thousands of dollars between each other during the past several years.  

15. Prasad Malempati is 50 years old and resides in Cupertino, California.  Malempati was 

employed at PANW in the IT group, where he became friends with Nellore, from 2013 until 2016.   

RELEVANT ENTITY 

16. Palo Alto Networks, Inc. is a Delaware corporation headquartered in Santa Clara, 

California.  PANW is a cloud-computing security firm that offers customers a security operating 

platform.  PANW’s common stock is registered with the Commission pursuant to Section 12(b) of 

the Exchange Act, and its securities are traded on the New York Stock Exchange under the ticker 

symbol “PANW.”  PANW’s fiscal year closes on July 31 of each calendar year. 

FACTUAL ALLEGATIONS 

A. Nellore Gains Access to Material Nonpublic Information Regarding PANW 

17. Nellore was employed by PANW as an IT administrator responsible for supporting the 

company’s internal financial databases.  In 2015, Nellore was promoted within PANW’s IT 

department and became entrusted with the highest level of permissions and access to the Company’s 

database responsible for generating information related to revenue, which was restricted and 

monitored for access.  This database – which was referred to internally as the Systems, Applications 

& Products in Data Processing (“SAP”) database – was essential to the process by which PANW 

determined its quarterly financial results, such as revenue, so that it could report those results 

publicly, including in SEC filings (the “financial close process”).  

18. In his position as an IT administrator, Nellore became one of only five individuals at 

PANW with the highest level of access to the SAP database, known as the “SAP Admin Group.”  

Nellore repeatedly accessed confidential information within the SAP database and other Company 

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systems while assisting the financial close process, which typically began approximately six weeks 

before the Company’s public earnings announcement.  As part of his job function, Nellore also 

regularly learned confidential information related to PANW’s earnings, including its revenue 

numbers, from business colleagues who were working on the financial close process.   

19. Accordingly, by virtue of his role at PANW, beginning no later than 2015 until his 

employment was terminated in 2019, Nellore acquired material nonpublic information regarding 

PANW’s earnings and financial performance for each quarter, well before the Company’s public 

earnings announcement.   

20. Nellore’s level of access to material nonpublic information at PANW came with 

additional obligations.  He was thus subject to several corporate policies that obligated him to 

maintain the confidentiality of information he obtained through his employment.   

21. For instance, beginning in or about 2012, Nellore was subject to PANW’s insider 

trading policy, which prohibited him from trading on, or disclosing to others, nonpublic information 

regarding PANW’s “[f]inancial results, financial condition, earnings pre-announcements, guidance, 

projections or forecasts, particularly if inconsistent with the Company’s guidance or the expectations 

of the investment community[,]” for which he received Company training.  Nellore was also subject 

to PANW’s employee handbook, which prohibited him from disclosing information regarding 

PANW’s “financial records” to “any unauthorized person inside or outside the company.”  

22. Given his high level of access, Nellore was also subject to quarterly trading “blackout” 

periods, during which PANW’s policy prohibited him from placing any trades to buy or sell PANW’s 

securities.  Typically, the blackout periods began with the second Monday of the last month of each 

quarter, and lasted until the end of the second full trading day after PANW publicly announced its 

earnings.  Nellore received blackout reminder emails to this effect during each quarter. 

B. Defendants’ Scheme to Trade PANW on Inside Information 

23. Despite the duties he owed to his employer, Nellore embarked on an insider trading 

scheme, by no later than 2015, in which he traded PANW securities on the basis of material 

nonpublic information he obtained from his employer, and passed this information as gifts of 

confidential information to four tippees, each of whom was his friend, for the purpose of trading 

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PANW securities.  Nellore also made separate tipping arrangements with the tippees, further allowing 

Nellore to benefit from trading on the basis of the material nonpublic information he learned from his 

work at PANW. 

Nellore’s Tipping Arrangements with Each of the Tippees 

24. By 2015, Nellore convinced Kunadharaju to grant Nellore electronic access to 

accounts opened in Kunadharaju’s name so that Nellore could place trades in those accounts.  Nellore 

explained to Kunadharaju that he would use Kunadharaju’s account to conceal the fact that Nellore 

was the source of the trading decisions.  In addition, Nellore convinced Kunadharaju to open an 

account in Kunadharaju’s wife’s name, and to give Nellore electronic access to the wife’s account so 

that Nellore could place trades in that account.  Nellore at times added money to Kunadharaju’s and 

Kunadharaju’s wife’s brokerage accounts, as did Kunadharaju.   

25. In exchange for allowing Nellore access to trade in the accounts, Kunadharaju agreed 

that Kunadharaju would keep the profits of PANW trading that Nellore conducted with 

Kunadharaju’s funds, while Nellore would take the profits from trading that Nellore funded.  Nellore 

additionally tipped Kunadharaju to place the same trades as Nellore, to enable him to further profit 

from the inside information.  Kunadharaju withdrew cash in amounts under $10,000 to kick back 

profits to Nellore.  

26. By 2015, Nellore also convinced Hussain to grant Nellore electronic access to at least 

one account opened in Hussain’s name so that Nellore could place trades in that account.  Nellore 

explained to Hussain that he would use Hussain’s account to conceal the fact that Nellore was the 

source of the trading decisions.  In exchange for Nellore’s use of Hussain’s account to trade PANW 

securities, Hussain agreed that Hussain would keep the profits of PANW trading that Nellore 

conducted with Hussain’s funds, while Nellore would take the profits from trading that Nellore 

funded.  Nellore also tipped Hussain to trade profitably in PANW securities based on Nellore’s inside 

information.  Hussain withdrew cash in amounts under $10,000 to kick back profits to Nellore.  

27. In a different arrangement, Nellore also regularly tipped Malempati to trade profitably 

in PANW securities based on Nellore’s inside information.  In exchange for the tips, Malempati, who 

had studied stock trading, provided his stock research regarding PANW’s anticipated stock price 

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movements to Nellore.  The purpose of these analyses was to help Nellore form a trading strategy.      

28. Nellore also regularly tipped Barama to trade in PANW securities based on Nellore’s 

inside information.  Nellore provided these tips as gifts to Barama in the context of their friendship.  

As one example of their mutual trust, Nellore asked Barama on one occasion for a cash loan and 

offered to pay Barama back in India; Barama indicated a willingness to oblige the request. 

29. As another example of their close ties, Barama relied on Nellore for investing advice.  

Accordingly, Nellore acted as Barama’s instructor in telling him how to trade, and frequently asked 

Barama about the magnitude of Barama’s trading and account balance.  Throughout the relevant time 

period, Nellore and Barama frequently discussed securities trading in communications via text 

messages and phone calls and when they met, including at their shared place of worship.   

Nellore’s Tips of Inside Information  

30. Nellore’s tips of inside information about PANW’s financial results were integral to 

the four tippees’ decisions to trade in PANW securities.  Indeed, the tippees often traded shortly after 

communicating with Nellore, and often within minutes or hours of each other.  Defendants, including 

Nellore, typically traded options on PANW securities, each typically making a consistent bet that 

PANW’s shares would ultimately rise or fall on the information about the Company’s earnings that 

Nellore had obtained.    

31. Throughout the scheme, Nellore passed tips of inside information regarding PANW to 

the four tippees, Barama, Kunadharaju, Hussain, and Malempati, in person, during phone calls, and in 

text messages.  At times, Nellore communicated important information about PANW’s likelihood of 

achieving projected revenue targets, including the revenue PANW earned during a given quarter, 

before the Company announced publicly the same information.  Nellore also recommended specific 

trading strategies – particularly involving trading options on PANW’s common stock – by, for 

instance, instructing the tippees to buy or sell call options or put options, and to buy or sell options at 

a specific strike price (or range). 

32. At Nellore’s direction, the ring employed options trading in order to place larger 

“bets” on the basis of the inside information Nellore supplied.  Options contracts offer a trader 

varying degrees of potential for risk and profit.  Options can be significantly cheaper to purchase than 

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common stock, allowing a trader to open a larger position in options than he could in stock, while 

magnifying the potential profits (and the potential risks of losses) from a trade.  

33. Nellore and the other traders frequently referred to PANW as the code word “baby” in 

texts and emails when discussing tips and trades to further mask their communications.  For example, 

when Malempati sent Nellore a text, “Sold half of PANW,” Nellore promptly urged Malempati to use 

the code word instead, saying, “It’s baby,” after which Malempati used the code word.  Nellore 

regularly referred to PANW as “baby” in his communications, including during text messages to 

Barama with advice such as “exit baby,” and “enter few baby.”  In contrast, when discussing 

securities other than PANW, Nellore and the other traders did not use code words.  

34. At times, Nellore discussed with the tippees the particular inside information, and at 

other times he told them how to trade based on the information.  For instance, Nellore told Barama in 

texts “we know the numbers,” and “strong numbers expected.”    

Defendants Trade Based on Inside Information from Nellore 

35. Beginning in or about 2015, Nellore and his tippees traded in advance of several 

PANW earnings announcements based on inside information sourced from Nellore.  The Appendix 

identifies Defendants’ illegal PANW trades ahead of PANW earnings announcements, and the 

relevant accounts in which these trades were placed. 

36. Nellore’s tips were highly lucrative to the ring.  At the scheme’s peak in 2017, 

Defendants achieved approximately $7 million in profits from unlawful trading in advance of 

PANW’s public earnings announcements.  Defendants continued to trade PANW securities through 

2018 – with mixed success – on the inside information sourced from Nellore.  

37. The following examples demonstrate the Defendants’ insider trading on the basis of 

Nellore’s material nonpublic information.   

Defendants’ Insider Trading in Advance of PANW’s November 21, 2016 Announcement 

38. Through his IT administrative privileges, and in discussions with business colleagues 

related to the financial close, Nellore acquired confidential information indicating that PANW’s 

earnings and financial performance for Q1 2017 (closed October 31, 2017) would be disappointing 

and likely surprise the market.     

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39. On the evening of November 16, 2016, just five days before PANW’s public earnings 

announcement, Nellore spoke by telephone for several minutes, first with Barama and then with 

Kunadharaju.   

40. The very next morning, November 17, 2016, Defendants Nellore, Barama and 

Kunadharaju began purchasing PANW “put options” – designed to capitalize on the material 

nonpublic information Nellore had.  Both Nellore and Kunadharaju placed trades in Kunadharaju’s 

accounts.  The purchaser of a PANW put option has the right (but not the obligation) to sell PANW 

shares at the specified “strike” price, before the stated expiration date of the option.  By purchasing 

put options, the traders were betting that the price of PANW’s shares would decline below the strike 

price before the options expired.   

41. Beginning at approximately 6:41 a.m. on November 17, 2016, Barama placed an order 

to buy PANW put options at a cost of approximately $72,000.  His order was followed closely, 

beginning at approximately 6:43 a.m., by orders placed by Nellore to buy PANW put options for an 

account in Kunadharaju’s name, at a cost of approximately $14,000.  Before approximately 

7:04 a.m., Barama also continued to purchase PANW put options, spending an additional 

approximately $51,000.  After these trades were placed, Nellore again communicated by telephone 

for several minutes that morning, first with Barama and then with Kunadharaju.  After those calls, at 

approximately 11:22 a.m., orders to purchase additional put options were placed in Kunadharaju’s 

account at an approximate cost of $3,000. 

42. On November 21, 2016, shortly after 1:00 p.m., PANW publicly announced its 

Q1 2017 earnings, revealing disappointing results for the Company.  By the end of the next day, the 

stock price had declined precipitously, closing roughly 13% lower than the prior day’s closing price.   

43. Defendants Nellore, Barama and Kunadharaju sold the put options between November 

21 and 23, 2016, profiting by more than $200,000.  

Defendants’ Insider Trading in Advance of PANW’s February 28, 2017 Announcement 

44. Through his IT administrative privileges, and in discussions with business colleagues 

related to the financial close, Nellore acquired confidential information indicating that PANW’s 

earnings and financial performance for Q2 2017 (closed January 31, 2017) would be disappointing 

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and would likely surprise the market.   

45. During the final weeks before PANW’s public announcement of its earnings, Nellore 

had several conversations with Barama, Kunadharaju, Hussain, and Malempati, and each of them 

placed trades in their brokerage accounts that were designed to profit if the market price of PANW’s 

securities fell after the earnings announcement.  At the time, Nellore was aware that PANW’s 

revenue results would disappoint and likely surprise the market.   

46. On the morning of February 8, 2017, Nellore and Malempati communicated twice by 

telephone for several minutes.  About two hours after the second call, at approximately 11:18 a.m., 

Malempati placed an order to purchase PANW put options.  Later that day, Nellore and Malempati 

spoke again by telephone for an approximately 24:06 minute call. 

47. On February 20, 2017, Nellore and Hussain communicated by telephone for an 

approximately 9:35 minute call.  On February 21, 2017, Nellore and Hussain communicated by 

telephone; hours later, orders to purchase PANW put options were placed in Hussain’s account.  

48. On February 28, 2017, PANW announced its earnings shortly after 1:00 p.m.  In the 

time period leading up to that announcement, Nellore spoke with Barama and Kunadharaju, and each 

traded.  Thus, beginning at approximately 9:06 a.m., Nellore and Kunadharaju spoke by telephone for 

approximately 25:00 minutes.  At approximately 10:26 a.m., Nellore and Barama communicated by 

telephone for approximately 1:28 minutes.  Then, from around 10:29 a.m. through 12:53 p.m., 

Nellore, Barama, and Kunadharaju each placed trades.    

49. Following their calls on the morning of February 28, just before the public 

announcement of PANW’s earnings, between approximately 10:29 a.m. and 12:53 p.m., Kunadharaju 

purchased PANW put options at an approximate cost of $15,000.  During this time, beginning at 

approximately 11:32 a.m., Nellore and Kunadharaju again spoke by telephone for approximately 

14:36 minutes.  Just as their call ended, an order was placed in Kunadharaju’s wife’s account to buy 

PANW put options at an approximate cost of $3,000.  Nellore and Kunadharaju initiated an 

approximately 43:01 minute call at 12:46 p.m., and during this call, at approximately 12:53 p.m. 

(12:00 minutes before PANW’s earnings announcement), an order was placed in Kunadharaju’s 

wife’s account to buy PANW put options at an approximate cost of $1,100.    

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50. Similarly, beginning at approximately 11:30 a.m. through 12:25 p.m. on February 28, 

Barama placed orders to buy PANW put options.  In the first order, Barama spent approximately 

$37,000 buying put options.  Barama then placed additional, larger orders to buy PANW put options 

at an approximate cost of $176,000.  While Barama’s orders were being placed and filled, beginning 

at approximately 11:59 a.m., Barama again communicated by telephone with Nellore for 

approximately 2:25 minutes.  After that phone call, Barama spent another approximately $26,000 on 

PANW put options.  

51. On February 28, before the public announcement of PANW’s earnings, Nellore also 

placed an order to buy PANW put options in his own account, at an approximate cost of $2,400.   

52. Hours after PANW’s February 28 earnings announcement, Nellore again 

communicated with each of the tippees by telephone in quick succession.  Beginning at 

approximately 1:36 p.m., Nellore and Barama had an approximately 2:33 minute call.  Immediately 

after, at approximately 1:38 p.m., Nellore and Malempati had an approximately 6:37 minute call.  

Less than an hour later, at approximately 2:25 p.m., Nellore and Kunadharaju had an approximately 

3:08 minute call.  Finally, beginning at approximately 6:22 p.m., Nellore and Hussain spoke for 

approximately 9:46 minutes.   

53. The next business day, each of the traders began to profitably sell their positions in 

PANW put options.  By the end of the day, PANW’s stock price had closed more than 24% below the 

prior day’s closing price.  Accordingly, Defendants’ unlawful trades in put options ahead of the 

February earnings announcement generated significant profits for them, which exceeded $1 million.  

54. On March 14, 2017, in order to funnel trading profits to Nellore, Kunadharaju 

withdrew from his bank account $9,500.  Kunadharaju then provided $9,500 in cash to Nellore, who 

deposited the cash into his own bank account on the same day.   

 Defendants’ Insider Trading in Advance of PANW’s May 31, 2017 Announcement 

55. Through his IT administrative privileges, and in discussions with business colleagues 

related to the financial close, Nellore acquired confidential information indicating that PANW’s 

earnings and financial performance for Q3 2017 (closed April 30, 2017) would exceed expectations 

and would likely surprise the market.  

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56. On May 31, 2017, PANW announced its earnings publicly.  As he had done in earlier 

quarters, Nellore tipped Barama, Kunadharaju, Hussain, and Malempati to trade on inside 

information he acquired from PANW in the weeks preceding the earnings announcement through 

communications in person, by telephone, and by other means.   

57. Furthermore, each of the Defendants traded on the information supplied by Nellore, 

buying “call options” in a highly coordinated manner, just ahead of PANW’s public announcement.  

The purchaser of a PANW call option has the right (but not the obligation) to buy PANW shares at 

the specified “strike” price, before the stated expiration date of the option.  By purchasing call 

options, the traders were betting that the price of PANW’s shares would increase above the strike 

price before the options expired.   

58.   On May 30, 2017, the day before the earnings announcement, beginning at 

approximately 6:37 a.m., each of the Defendants initiated trades to buy PANW call options in quick 

succession.  First, beginning at approximately 6:37 a.m., orders to purchase PANW call options were 

placed in Hussain’s account.  About one minute later, Nellore began placing orders to buy call 

options in one of Kunadharaju’s accounts; nearly simultaneously, Kunadharaju placed orders to buy 

PANW call options in another of Kunadharaju’s accounts.  Then, beginning at approximately 6:50 

a.m., Nellore placed orders to buy PANW call options in his own account.   

59. Later that morning, Nellore communicated with Kunadharaju, Barama, and 

Malempati, and each of the tippees placed orders to buy PANW call options.  Thus, between 

approximately 8:00 a.m. and 8:40 a.m., Kunadharaju placed orders to buy PANW call options; during 

this time, Kunadharaju and Nellore communicated by telephone in three separate calls for 

approximately 1:13, 8:25, and 8:19 minutes.  During each of the approximately 8 minute calls 

between Kunadharaju and Nellore, Kunadharaju placed orders to buy PANW call options.  

60. Similarly, at approximately 8:45 a.m. on May 30, Nellore communicated with Barama 

by telephone for approximately 1:42 minutes.  Then, beginning at approximately 9:00 a.m., Barama 

placed orders to buy PANW call options, at an approximate cost of nearly $250,000.  Barama texted 

Nellore at approximately 9:21 a.m. to ask, “Baby ok?” and “Call me when u free” to which Nellore 

replied the same morning, “No problem keep adding[.]”     

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61. Finally, beginning at approximately 9:48 a.m. on May 30, Malempati placed orders to 

buy PANW call options; Malempati called Nellore, and Nellore returned the call and spoke with 

Malempati for approximately 8:00 minutes within about one hour of these trades.  Later that day, 

Nellore spoke again via telephone with Hussain, Kunadharaju, and Barama.  

62. PANW publicly announced its earnings on May 31, 2017 at approximately 1:00 p.m.  

Within hours, Nellore was again in contact with each of the tippees.  First, Nellore and Kunadharaju 

spoke for a total of approximately 15 minutes during three calls from 1:29 p.m. through 2:02 p.m.  

Then, Nellore and Malempati communicated by text message at approximately 2:06 p.m.  Later, 

Nellore and Hussain spoke at approximately 5:35 p.m. for 9:28 minutes, followed shortly after by 

another call between Nellore and Kunadharaju at approximately 5:45 p.m. for 11:50 minutes, and a 

call between Nellore and Barama at approximately 5:59 p.m. for 5:17 minutes.  

63. The day after the announcement, June 1, 2017, each of the traders began to sell their 

PANW call options for a profit.  As PANW’s stock price closed at the end of the day about 17% 

higher than the prior day’s closing price, Defendants’ trades in advance of the announcement 

generated profits that exceeded $3 million.    

64. On June 13, 2017, in order to funnel trading profits to Nellore, Kunadharaju’s wife 

withdrew $9,500 from her bank account.  Kunadharaju then provided $9,500 in cash to Nellore, who 

deposited the cash into his own bank account the same day.   

C.  Defendants Acted Intentionally 

65. Nellore knowingly or recklessly traded on the basis of material nonpublic information 

and tipped Barama, Kunadharaju, Hussain, and Malempati to trade as well. 

66. At the time of the trading described above, Nellore knew, or should have known, that 

the information he acquired at PANW regarding its earnings and financial performance was material 

and nonpublic, and that he had a duty to his employer to keep such information confidential.  Nellore 

knew or was reckless in not knowing that he owed PANW a fiduciary duty, or an obligation arising 

from a similar relationship of trust or confidence, to keep this information confidential.   

67. In particular, Nellore was aware of several restrictions prohibiting him from trading, 

or tipping others to trade, based on the confidential PANW information, including but not limited to 

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the Company’s insider trading policy and its trading blackout periods. 

68. In receiving insider trading tips from Nellore, Barama, Kunadharaju, Hussain, and 

Malempati each knew, or were reckless in not knowing, that the information Nellore conveyed 

regarding PANW was material nonpublic information and that they should not trade on such 

information.   

69. In addition, Barama, Kunadharaju, Hussain, and Malempati knew, were reckless in not 

knowing, or consciously avoided knowing, that the material nonpublic information was disclosed by 

Nellore in breach of a fiduciary duty or obligation arising from a relationship of trust or confidence.    

70. At the time of the trading described above, Defendants each acted with deceptive 

intent.  As Nellore revealed to both Kunadharaju and Hussain, he used their accounts to trade in 

PANW securities in order to mask the fact that Nellore was the source of the trading decisions.  

Nellore also took affirmative steps to conceal his identity and ability to make trades in these accounts.  

For example, in or about February 2018, Nellore used his cell phone to call Hussain’s brokerage firm 

to place a trade in PANW securities in Hussain’s account; during the call, Nellore identified himself 

as Hussain, and provided personal details regarding Hussain, in order to surreptitiously obtain access 

to the account.   

71. Nellore and the other traders also frequently used the code word “baby” in texts and 

emails when discussing tips and trades, to further mask their communications.  In contrast, when 

discussing securities other than PANW, Nellore and the other traders did not use code words.    

72. Defendants also used devices to disguise kickbacks paid to Nellore in exchange for his 

tips or to send him his profits from trading.  For instance, Hussain and Kunadharaju each withdrew 

cash in amounts just below the legal limits for law enforcement reporting to pass the money to 

Nellore without having to explain the reasons or details for the withdrawals to the financial 

institutions where they held accounts.      

73. Ultimately, upon learning about law enforcement inquiries into his trading and tipping, 

Nellore made plans to leave the United States.  On or about May 7, 2019, agents from the Federal 

Bureau of Investigation approached Nellore, to discuss, among other things, his trading in PANW 

securities.  

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74. Sometime after the interview, Nellore secured one-way flight tickets for himself and 

his family to India.  The FBI intercepted Nellore at the airport on May 8, 2019 while he was trying to 

board the flight.   

FIRST CLAIM FOR RELIEF 

Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder 

(Against All Defendants) 

75. Paragraphs 1 through 74 are hereby re-alleged and are incorporated herein by 

reference. 

76. Nellore had a duty to keep material nonpublic information that he acquired from 

PANW confidential.  Information about PANW’s earnings and financial performance was maintained 

as confidential by PANW, which had policies to protect its confidential information.  Nellore learned 

the information about PANW’s earnings and financial performance as a result of his employment at 

PANW, and thus knew, or recklessly disregarded, that he owed a fiduciary duty, or an obligation 

arising from a similar relationship of trust and confidence, to PANW to keep the information 

confidential and to refrain from trading and from tipping the information to others.  In breach of that 

duty, Nellore traded on the basis of the material nonpublic information and he knowingly or 

recklessly communicated material nonpublic information to others so that they could trade securities 

on the basis of the information.  Nellore communicated material nonpublic information to others in 

exchange for personal benefits, or with the expectation of receiving a benefit. 

77. Barama, Kunadharaju, Hussain, and Malempati knowingly or recklessly traded on the 

basis of material nonpublic information from Nellore.  Barama, Kunadharaju, Hussain, and 

Malempati knew, were reckless in not knowing, should have known, or consciously avoided knowing 

that the material nonpublic information from Nellore was disclosed in breach of a fiduciary duty or 

obligation arising from a relationship of trust or confidence. 

78. By engaging in the conduct described above, Nellore, Barama, Kunadharaju, Hussain, 

and Malempati, with scienter, in connection with the purchase or sale of securities as set forth above, 

directly or indirectly: 

a. employed devices, schemes, or artifices to defraud; 

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b. made untrue statements of material facts and omitted to state material facts necessary 

in order to make the statements made, in light of the circumstances under which they 

were made, not misleading; and 

c. engaged in acts, practices, and courses of business which operated or would operate as 

a fraud or deceit upon other persons, including purchasers and sellers of securities;  

by the use of the means or instrumentalities of interstate commerce, and of the mails, and the 

facilities of a national securities exchange. 

79. By reason of the foregoing, Nellore, Barama, Kunadharaju, Hussain, and Malempati 

violated, and unless restrained and enjoined will continue to violate, Section 10(b) of the Exchange 

Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. 

SECOND CLAIM FOR RELIEF 

Aiding and Abetting Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder 

(Against Defendants Barama, Kunadharaju, Hussain, and Malempati) 

80. Paragraphs 1 through 74 are hereby re-alleged and are incorporated herein by 

reference. 

81. By engaging in the conduct described above, Barama, Kunadharaju, Hussain, and 

Malempati, each knowingly or recklessly provided substantial assistance to Nellore, who knowingly 

or recklessly, in connection with the purchase or sale of securities as set forth above, directly or 

indirectly: 

a. employed devices, schemes, or artifices to defraud; 

b. made untrue statements of material facts and omitted to state material facts necessary 

in order to make the statements made, in light of the circumstances under which they 

were made, not misleading; and 

c. engaged in acts, practices, and courses of business which operated or would operate as 

a fraud or deceit upon other persons, including purchasers and sellers of securities;  

by the use of the means or instrumentalities of interstate commerce, and of the mails, and the 

facilities of a national securities exchange. 

82. By reason of the foregoing, Barama, Kunadharaju, Hussain, and Malempati, directly 

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or indirectly, singly or in concert, aided and abetted violations of, and unless restrained and enjoined 

will continue to violate,  Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 

thereunder, 17 C.F.R. § 240.10b-5. 

PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court enter a judgment: 

I. 

Finding that Defendants violated Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and 

Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. 

II. 

Permanently restraining and enjoining Defendants, their officers, agents, servants, employees, 

and attorneys, and those persons in active concert or participation with them who receive actual 

notice of the injunction by personal service or otherwise, from directly or indirectly violating Section 

10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. 

III. 

Ordering Defendants to disgorge, with prejudgment interest, all illicit trading profits, losses 

avoided, or other ill-gotten gains received by them, directly or indirectly, as a result of the conduct 

alleged herein. 

IV. 

Ordering Defendants to pay civil penalties pursuant to Section 21A of the Exchange Act, 

15 U.S.C. § 78u-l. 

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V. 

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

 

Dated: December 17, 2019    Respectfully submitted,  

 

/S/ Christina N. Filipp               
 

Christina N. Filipp 
Attorney for Plaintiff 
SECURITIES AND EXCHANGE 
COMMISSION 
 

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 Appendix 

                                                 
1 Accounts referenced include both personal and spousal accounts of the Defendants. 

 
 

PANW Earnings 
Announcement  

 
Accounts Placing Illegal Trades in PANW Securities1 

Nellore 
(Insider) 

Barama 
(Tippee) 

Kunadharaju 
(Tippee) 

Hussain 
(Tippee) 

Malempati 
(Tippee) 

Nov. 23, 2015 (1Q16)  X X X  
Feb. 25, 2016 (2Q16)  X  X  
May 26, 2016 (3Q16)      
Aug. 30, 2016 (4Q16)  X X   
Nov. 21, 2016 (1Q17)  X X   
Feb. 28, 2017 (2Q17) X X X X X 
May 31, 2017 (3Q17) X X X X X 
Aug. 31, 2017 (4Q17)  X X X X 
Nov. 20, 2017 (1Q18)  X X X X 
Feb. 26, 2018 (2Q18) X X X X X 
June 4, 2018 (3Q18)  X X  X 
Sept. 6, 2018 (4Q18)  X X X X 

Case 5:19-cv-08207   Document 1   Filed 12/17/19   Page 19 of 19