SEC Charges Hedge Fund Managers And Former FDA Official In Insider-trading Scheme

The Securities and Exchange Commission filed insider-trading charges on Wednesday against Sanjay Valvani and Christopher Plaford, portfolio managers at Visium Asset Management, and their alleged source Gordon Johnston, a former deputy director of the United States Food and Drug Administration's Office of Generic Drugs. Johnston concealed a paid role as a consultant to the hedge fund and obtained confidential information about anticipated FDA approvals for companies to produce enoxaparin, a generic drug that helps prevent the formation of blood clots, according to the SEC's complaint. Valvani allegedly traded in advance of public announcements concerning FDA approvals for companies such as Momenta Pharmaceuticals , Watson Pharmaceuticals , and Amphastar Pharmaceuticals and tipped off Plaford. Valvani allegedly earned nearly $32 million in unlawful profits and Plaford allegedly made approximately $300,000. In a separate complaint, the SEC charged another manager at Visium Asset management, Stefan Lumiere, with perpetrating a fraudulent scheme to falsely inflate the value of securities held by a hedge fund advised by the firm. The fund reported artificially inflated returns and monthly net asset values, which resulted in more than $5.9 million in inflated management and performance fees being paid to its investment adviser. The U.S. Attorney's Office for the Southern District of New York filed parallel criminal charges on Wednesday against Valvani, Johnston, Lumiere, and Plaford.

Copyright © 2016 MarketWatch, Inc.