Will Puneet Dikshit face prison for alleged illegal trading while a McKinsey partner
November 13, 2021
This week U.S. federal prosecutors in New York filed a criminal complaint against Puneet Dikshit alleging “securities fraud in connection with a scheme to commit insider trading based on material, nonpublic information.” Dikshit, who was arrested this week, faces a maximum 40 years in prison if convicted.
At the time of the alleged crime, Dikshit, 40-years-old, was a partner based at the New York head office of McKinsey, a global management consulting firm.
During the summer of 2021, McKinsey had been providing consulting services to investment bank Goldman Sachs about point-of-sale lending, including discussions about GreenSky. Dikshit worked as a lead partner on McKinsey’s “engagement by Goldman concerning the GreenSky acquisition,” the U.S. Securities and Exchange Commission (SEC) stated in a parallel civil suit against Dikshit, which was also filed this week.
GreenSky was a publicly traded company that provided technology to banks and merchants to make loans to consumers for home improvement, solar, healthcare, and other purposes. In September, “in the course of providing consulting services, Dikshit learned highly confidential information concerning The Goldman Sachs Group Inc.’s impending acquisition” of GreenSky, according to the SEC.
The SEC alleges Dikshit used the non-public information to purchase out-of-the-money call options on GreenSky’s stock that were set to expire just days after the announcement. The price of the call options could rise sharply if the underlying stock were to move higher on some positive news. Dikshit bought the options in his and his wife’s brokerage accounts.
On the morning of September 15, 2021, Goldman Sachs announced it was buying GreenSky for $2.2 billion. GreenSky’s stock rose about 55% on the news. Dikshit sold the call options that day and allegedly made over $450,000 in trading profits, getting an 1,800% return in only a few days.
That day, after the deal announcement, a McKinsey representative sent an email to company employees stating that Dikshit and another employee “have been in the middle of this for the last 2 years.”
Partners at McKinsey earn around $1 million a year, according to recruiting firms. Dikshit was fired by McKinsey apparently after the SEC and prosecutors began investigating his options trading in GreenSky.
McKinsey has more than 2,000 partners, including over 560 senior partners, among its 27,000 employees in 127 cities in 65 countries.
Puneet Dikshit, who grew up in India, appears to have changed the spelling of his last name to Dixit in some documents. He first worked at McKinsey as a summer associate. After joining as an associate, he rose to become a partner, including leading McKinsey's Payments Practice and Digital Payments Service line for the U.S. Prior to McKinsey, Dikshit worked at Citigroup in debit card and mergers and acquisitions, apparently in India.
Dikshit earned his MBA from the University of Michigan’s Ross School of Business in 2013. Ten years earlier, he earned a degree from the Sydenham College of Commerce and Economics in Mumbai.
“Thanks to our trading analysis tools, we were able to move swiftly to hold (Dikshit) accountable for his actions,” Joseph G. Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit said in a statement.
In 2012, Rajat Gupta, former McKinsey managing partner, was convicted of insider trading and spent two years in prison. About three weeks after Goldman agreed to buy GreenSky, Dikshit ran Google searches about Gupta's conviction, Reuters reported.
Several others, besides Dikshit, likely had access to the deal information and traded off it, according to CNBC. In September, the business news site reported that suspicious trades were made in GreenSky options in the weeks ahead of its purchase by Goldman. Volumes for call options on GreenSky spiked from 153 on September 7 to 12,755, by September 13, two days before Goldman’s purchase announcement. The contracts were mostly sold for a profit on September 15, CNBC reported.
“When we see unusual activity like that, we tend to think that somebody had tomorrow’s newspaper today,” Jon Najarian an options trader told CNBC in September. “Nobody’s that lucky. Whoever bought those calls will probably face regulators.”
UPDATE: Puneet Dikshit to serve 24 months in prison. April 2022.
On April 6, 2022, Puneet Dikshit was sentenced to 24 months in prison by a judge in New York. This followed his guilty plea, on December 15, 2021, to securities fraud and insider trading based on material, nonpublic information regarding Goldman Sachs – which Dikshit and McKinsey were advising – would be acquiring GreenSky. “Puneet Dikshit must face the consequences of his egregious crime,” U.S. Attorney Damian Williams said in a statement. “We will continue to…hold accountable those who cheat by trading on inside information…corporate advisors who steal information entrusted to them and use it for their personal gain will be caught and prosecuted.”
