Is Ubiquiti Networks Being Investigated by the SEC and FBI?

Ubiquiti Networks

is one of the more controversial technology stocks on the Nasdaq right now. The company "sells high-performance communication platforms to developing emerging markets and underserved and underpenetrated markets.” Ubiquiti went public last October, and shares promptly more than doubled. The stock hit an all-time high above $35 at the beginning of May. Since then, shares have fallen precipitously to their current price of roughly $11.80. The controversy in the name is related to a number of issues. First, the company has admitted to shipping some of its products to Iran, although they place the blame on a Middle Eastern distributor. Exporting into Iran is banned by the U.S. government. Furthermore, there have been legal questions about a large Ubiquiti distributor in South America. Even more damning, reports circulated last month that the company had ties to the Chinese Mafia. However, the distributor, who has been sued by Ubiquiti, claims that the company knew about the illegal shipments. This

, written by Herb Greenberg offers the back story on Ubiquiti. On Thursday, Benzinga talked with the company's CFO John Ritchie. He told Benzinga that his company is not the subject of an SEC investigation to the best of his knowledge. Asim Sajwani, the former master distributor for Ubiquiti Networks

, who has been blamed for the shipments to Iran, told Benzinga he was contacted recently by three investigators from the SEC (he would not name them) regarding his relationship with the San Jose, CA wireless technology company. Sajwani said the investigators were interested in movements of cash as well as sales of technology to Iran. Sajwani said the investigators also wanted information on Flytec, Ubiquti's Florida-based Latin American distributor. Ritchie said he was not aware of any investigation of Flytec by U.S. or Chinese authorities. Sajwani made his contact with the SEC known in a

, which circulated across the Internet via Twitter and various trader chat rooms on Thursday. Shares of Ubiquiti Networks, plunged from a high of $13.15 to a low of $9.37 once this information became public. Sajwani, who was the master distributor for Ubiquiti for the Middle East region from 2008 to 2010, claims the company was not only aware of his sales to Iran (made through distributors he set up in Tehran and Shiraz), but says CEO Robert Pera had asked him to set up a 'secret bank account' in Dubai to handle payment for the shipments. Sajwani said Ubiquiti later decided to open the bank account in Hong Kong, as most of the Ubiquiti products were manufactured in China. Ritchie told Benzinga that Ubiquiti went through a period when they lacked knowledge of export laws and failed to closely track shipments to prevent them from making their way to countries on the Bureau of Industry and Security's (“BIS”) Office of Export Enforcement prohibited list. Ubiquiti received a warning letter from BIS and now has systems in place to more closely monitor their distributor's activities. In May 2012, Ubiquiti received a judgement against Sajwani's company X-Concepts in the amount of $2.1 million for unpaid invoices. Sajwani claims he was visited by Pera in Dubai in October 2011 and was told that if he did not shut down his company Pera would "destroy" him and his family. Ritchie denies Pera ever made such a threat. Specifically, Ritchie said "Mr. Pera would never have threatened him." In his conversation with Benzinga, Sajwani said that his contact with the SEC occurred two weeks ago and that one of the investigators told him to expect to be contacted by the FBI. As of Thursday, the FBI had not yet contacted him. He also explicitly stated that Ubiquiti CEO Robert Pera asked him to sell into Iran. The company wired $140,000 to Sajwani to open X-Concepts, lease space, and hire staff. In 2009, Sajwani told Benzinga that Ubiquiti said not to sell to Iran. Nevertheless, from 2008 to 2010, X-Concepts received orders from Iran and he claims that Ubiquiti was aware of these orders. The SEC filing relating to the Iranian shipments says that X-Concepts was selling to Iran without the knowledge of Ubiquiti Networks. Sajwani continues to say that the company did in fact know, and that the emails he has proves this. While Ubiquiti management told Benzinga that to the best of their knowledge there is no SEC investigation, it is possible that the company is currently under investigation. The emails and documents that have been provided to Benzinga by Sajwani do not clearly prove that an investigation is under way, but they do suggest a possibility.