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A former engineer at graphics-technology developer Nvidia was arrested Aug. 29 and charged with insider trading after allegedly earning nearly $450,000 in stock profits after the company landed a lucrative deal with Microsoft Corp. Manu B. Shrivastava, 31, was arrested by the FBI at his San Jose, Calif., home Tuesday morning and later released on $500,000 bail. In both criminal and civil cases, the Securities and Exchange Commission and U.S. attorney’s office have charged that Shrivastava purchased $30,825 in call options � contracts to buy a stock at a fixed price by a specific date � after he learned that Microsoft agreed to hire Santa Clara, Calif.-based Nvidia to design and manufacture the 3D graphics and multimedia sub-system for the software giant’s new X-Box videogame console. After the information went public, he allegedly sold the call options, netting $446,724 in a matter of days. Shrivastava faces one count of securities fraud and one count of wire fraud, with a maximum penalty of up to 10 years in prison and fines of as much as $500,000. He also faces a civil lawsuit filed by the SEC, which has charged him with securities fraud. The regulatory agency is asking for monetary penalties of up to three times his profits, or nearly $1.5 million. “This case should send a strong signal to those who would take unfair advantage of their privileged positions in Silicon Valley,” U.S. Attorney Robert S. Mueller III said in a statement. Law enforcement authorities report that insider trading has been on the rise in recent years, as Silicon Valley stocks have skyrocketed in value. Shrivastava and his attorney, Bruce Monroe, did not return phone calls to comment. The case dates back to March 5, when Microsoft and Nvidia reached the deal on the X-Box, scheduled for release in fall 2001. That night, Nvidia President and CEO Jen Hsun Huang fired off an e-mail titled, “X is Ours!” to employees, informing them of the agreement. The next morning, the company’s VP of marketing reminded employees in an e-mail that the news was confidential, but according to the SEC and federal charges, it was that same morning that Shrivastava began to buy Nvidia call options. Shares of Nvidia closed at $58.50 on March 6, down 37 cents from the previous Friday’s close. From March 7 to March 9, as rumors about the X-Box contract circulated, Nvidia share prices soared 71.4 percent to a March 9 closing price of $100.30. After Microsoft publicly announced the X-Box agreement on March 10, Nvidia shares rose an additional 17.6 percent to close at $118, more than double their closing price on the day Shrivastava made his initial options purchases. He sold the options between March 7 and March 10. Nvidia, which cooperated in the investigation, fired Shrivastava in August after the company determined that he violated internal rules governing stocks, says company spokesman David Perez. Nvidia prohibits employees from buying and trading its stock and had established a blackout period prohibiting the sale of stock at the time surrounding the Microsoft announcement, Perez added. Officials with Nvidia have not been charged, but the SEC is continuing to investigate the case, said Robert L. Mitchell, an assistant district administrator who noted that more than 400 employees knew of the Microsoft deal before Nvidia shareholders. Related articles from The Industry Standard Nintendo to Add Web Access to Games Sega, Motorola, Sun Play Wireless Games Can Microsoft Get Game(rs)? Copyright (c)2000 The Industry Standard

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