McKinsey partner Puneet Dikshit has been accused with insider trading in the Goldman Sachs transaction

A McKinsey & Co. partner who advised Goldman Sachs Group Inc. on its prospective acquisition of GreenSky Inc. was accused with profiting more than $450,000 from unlawful trades using inside information about the deal.

According to criminal charges unsealed Wednesday in Manhattan federal court, Puneet Dikshit, 40, purchased short-term GreenSky options before the bank’s Sept. 15 announcement that it planned to acquire the financial technology company for around $2.24 billion and then sold them when shares soared on news of the deal. The Securities and Exchange Commission is also suing him, alleging that Dikshit made a 1,829 percent profit on his $24,647 trade.

Some of the deals were purportedly done by Dikshit using his work computer. McKinsey fired Dikshit on Wednesday for a “gross violation” of company policies and code of conduct. “We have zero tolerance for the heinous behaviour mentioned in the complaint, and we will continue to cooperate with authorities,” the consulting business stated in a statement.

Dikshit’s lawyers did not immediately respond to requests for comment via email.

Partner in Charge

Prosecutors claim that Goldman hired McKinsey in late 2019 to advise on its planned acquisition of GreenSky, which sells technology that allows banks and merchants to make “buy-now-pay-later” loans to consumers at the point of sale, and the eventual integration of the company into the bank’s holdings after the deal closed. Dikshit, who managed McKinsey’s unsecured loan business in New York, was one of the deal’s main McKinsey partners.

“We are profoundly saddened by the insider trading claims and are fully cooperating with the inquiry,” Goldman stated in a statement.

The speed with which the charges were filed against Dikshit shows that regulators were tipped off by unusually high levels of option trading surrounding the announcement of the deal. Prosecutors believe Dikshit used accounts in his and his wife’s names to trade in GreenSky options from July 26 to September 15.

The insider-trading claims levelled against Dikshit aren’t the first to draw attention to Goldman’s and McKinsey’s partnership. McKinsey’s former global chief, Rajat Gupta, was convicted in 2012 of passing illegal tips to Galleon Group Inc. co-founder Raj Rajaratnam using his position as a Goldman board member. Gupta was sentenced to 30 months in prison, while Rajaratnam was sentenced to 11 years in prison for his role in what prosecutors described as one of the greatest hedge-fund insider-trading schemes in US history.

Suspicious Trading

Following the announcement of the GreenSky acquisition, CNBC reported on strange trading in the options market in the days prior, citing market participants. GreenSky stock options traffic increased to more than 35,000 call and put options contracts in the five days before the purchase was disclosed, according to Bloomberg data. In the previous five days, fewer than 1,000 options had changed hands.

Dikshit has been charged with two counts of securities fraud in connection with the suspected insider trading. If convicted of the fraud charges, he faces a maximum penalty of 20 years in jail, though the sentence is likely to be significantly less. In the SEC’s civil litigation, he faces similar allegations.

According to the SEC, the consultant used an account in his name and one in his spouse’s name to make his trades. Prosecutors said they discovered evidence of Dikshit’s insider trading on his work computer. Dikshit used Google to search “what happens to options when company is acquired” and “greensky market cap” the day before the GreenSky acquisition was revealed. According to them, he also used it to check his broker’s website for information on $10 GreenSky call options.

After learning of questionable activity in GreenSky options three weeks later, Dikshit used his McKinsey computer to conduct searches on Rajat Gupta’s insider trading conviction.