What's up guys and welcome back to wall street millennial on this channel, we cover everything stocks and investing today we're continuing our series on financial fraud with another insider trading case. This one involves a business consulting partner in manhattan named punit dixit, the securities and exchange commission charged him with illegally trading in advance of a corporate acquisition. On wednesday november 10 2021, the complaint was filed in a federal court in manhattan. According to the sec, dixie was a partner at a global management.

Consulting firm other news outlets, including cnbc, reported that consulting firm to be mckenzie, one of the so-called big three consulting firms. The case involves mackenzie's client goldman sachs and their takeover of fintech company green sky inc, as a partner at mckinsey. Dixit had intimate knowledge of an acquisition before it was publicly announced. He used this information to profitably.

Buy out of the money call options on green sky before the announcement he sold the calls on the same day as the announcement was made, making about half a million dollars in elicit profits pretty much overnight in this video, we'll take a closer look at what dickshit Did and how he was able to make so much money on this acquisition. Green sky is a fintech company that primarily engages in lending for home improvement projects. They provide financing for home buyers and owners to have renovations and additions done on their homes. The bulk of their business comes from partnering with contractors so that, when contractors pitch their ideas to customers, they have an option to help the customer pay for the contractor work.

In this way, they're able to achieve high customer retention in recurring revenue since the contractors essentially do all the work of selling their product to consumers. Green sky was founded in 2006 and in recent years, has experienced rapid growth. On top of that, it has been consistently profitable since it went public in 2018.. You can see here from our website wallstreetmillennial.com that they had positive net income in every single quarter, going back to 2017, except for the quarter when the pandemic first hit their strong business and the fact that they're, a strong player in the fintech industry led to some People speculating that they'd be a takeover target.

In september of this year, green sky and goldman sachs announced that goldman would be acquiring green sky, an all stock merger agreement. It specified that each share of green sky would be converted into .03 shares of goldman sachs common stock, based on the stock price of goldman sachs, the agreement valued green sky at approximately 2.24 billion dollars. Goldman sachs said that the acquisition would enhance their ability to provide customers with borrowing, financing and investing services. They hope to generate synergies between green sky's, growing network of merchants and goldman's own marcus consumer banking platform.

Punit dixit was intimately involved in the merger between goldman sachs and green sky. Dickshit is a 40 year old partner at a consulting firm reported by media outlets to be mackenzie based in new york city. He led the firm's north america, unsecured lending and digital payment service lines since late 2019, dixie was part of the team that provided consulting services to goldman sachs. That focused on point-of-sale lending.

Green sky is a point-of-sale lending services company that announced publicly that they are looking towards quote potential strategic alternatives, unquote whenever a company says they're pursuing strategic alternatives that usually means that they're soliciting buyers to acquire their company. This can be the result of the company's poor financial condition, the founders or significant shareholders wanting to cash out or other reasons. In the case of green sky, goldman sachs engaged, mackenzie and dickshit to work on the potential acquisition of green sky, a project that they code named project glacier by december of 2019. Mckinsey and goldman entered into a final agreement to work on this acquisition project and sign non-disclosure agreements.

Goldman then granted mckinsey and thus dickshit access to sensitive and confidential data relating to due diligence processes for the acquisition, the consulting firm needed, this data to perform work regarding valuations, financial numbers and projections etc. Relating to the potential acquisition, however, coinciding with the onset of the pandemic goldman cut off negotiations with green sky about the acquisition in march of 2020.. This is consistent with many financial deals during that time, such as the high profile go private deal between the private equity, firm sycamore partners and the parent company of victoria's secret. That deal also fell through at the beginning of the pandemic.

However, in the middle of 2021, with the reopening well underway, goldman and green sky restarted talks. The 2019 nondisclosure agreement was extended. On july 15th, goldman sachs submitted a formal acquisition proposal to green sky. However, green sky quickly rejected the proposal throughout that summer, goldman sachs continued to work on negotiations they enlisted mckenzie and with mackenzie printing dick to formally put together a document regarding goldman's new proposals to acquire green sky almost immediately after goldman asked dickshit and his team to Work on the project: on august 6, 2021 dickship proceeded to purchase thousands of call options on green sky.

At the time green sky was trading for about eight dollars. A share dixie knew that an acquisition announcement was likely to happen, so he chose a strike price of 10. That means that the stock would have to increase by 25, just to avoid expiring worthless. The expiration date on the calls was just four months later december 17th.

Throughout the remainder of august, internal emails within mckinsey show that they were aware of potential other interested buyers of green sky and thus wanted to move fast on the deal by the end of august, one of dixit's colleagues reported to him that golden was in the formal Process to make an official offer and that a final best offer was imminent within weeks during this period, dixon continued to buy additional call options on green sky. In the evening of september, 9th dixit learned from colleagues that goldman had unofficially won the deal from green sky. The colleague told dickshit that a deal would likely be signed. The following monday september 13th dickshit continued to purchase more calls on green sky following this news, but dickshit did some of his most blatant buying on september 13th from within mackenzie's own internet network.

He bought hundreds of out of the money calls expiring the same week on september 17th that same night. He also transferred more money into his brokerage account, which he used to buy more calls on green sky the very next morning. He also sold some of his own green sky options, expiring in december and in january of 2022, and used the proceeds of the sale to buy tens of thousands of dollars worth of calls expiring later in that week. At that point, he had tens of thousands of call options on green sky, many of which were significantly out of the money and with an expiration date.

Within days. The very next day, on september 15th, goldman sachs announced publicly that had entered into a definitive agreement to acquire green sky in an all stock transaction. The details of the agreement stipulated that each share of green sky would be converted into .03 shares of goldman sachs at approximately 400. A share that implied that each green sky share would be worth approximately 12 dollars immediately.

The market price of green sky stocks shot up from less than eight dollars to very close to 12 dollars. A share that more than 50 spike in stock price was fully accretive to dickshit's highly speculative call option portfolio his out of the money weekly calls were suddenly more than two dollars or 20 percent in the money by 9. 35 am only five minutes into the start of trading. He had liquidated hundreds of thousands of call options collectively.

This position had cost him. Just twenty three thousand dollars to put on the proceeds he collected on their sale amounted to almost four hundred fifty thousand dollars. He also liquidated twenty six thousand dollars of green sky calls in an account on behalf of his spouse, a position that only cost one thousand five hundred dollars to put on originally. Overall, his trading incurred an annualized return of about six thousand percent for more than four hundred fifty thousand dollars of illicit gains.

Dixit appears to have made no real effort to hide his illicit insider trading throughout the entire process. One might wonder whether he even knew what he was doing was illegal and counted as insider trading. However, as a partner at one of the most prestigious consulting firms in the world, he was subject to very clear rules and regulations regarding the use of material non-public information. He breached a duty of trust and confidence with his employer that required him to maintain confidentiality of the information they received in his role.

Instead, he decided to use this information to line his own pockets, even more than they already should have been just from being a partner at mckenzie. Within less than two months, the sec was able to analyze the suspicious training, behavior and trace it back to dickshit. On november 10th, they charge him with illegally trading in advance of a corporate acquisition by his firm's own client. He will likely face hundreds of thousands of dollars in fines and disgorgement and likely face prison time, alright, guys that wraps it up for this video.

What do you think about punit dixit's decision to buy all the money weekly calls on an acquisition target that he is working on at mckenzie? Let us know in the comments section below, if you enjoyed this content, make sure to smash the like button and subscribe. So you don't miss future videos in the meantime. Thank you. So much for watching and we'll see you in the next one wall, street millennial, signing out.