In one of the biggest insider trading cases since a 2014 court ruling made it harder for U.S. prosecutors to pursue them, a Manhattan hedge fund manager was charged with trading on confidential tips about drug approvals.
By gaining advance word about U.S. Food and Drug Administration approvals of generic drug applications, Sanjay Valvani of Visium Asset Management LP has been accused of fraudulently making $25 million by U.S. Attorney Preet Bharara in Manhattan.
Gordon Johnston, a consultant who got tips from a friend and former FDA colleague still working at the agency was the provider of the inside information, prosecutors said.
Prosecutors said that Christopher Plaford, then a Visium portfolio manager, made his own illegal trades from the tips that were passed on to him by Valvani.
"Sadly these are schemes we see time and time again, where lies and use of non-public information profits those conducting the crimes, and everyday investors lose out," FBI Assistant Director-in-Charge Diego Rodriguez said in a statement.
Allegations of fraudulently inflating the value and liquidity of a bond fund they oversaw by getting "sham" price quotations from brokers, in an effort to prevent investors from demanding their money back have been leveled against Plaford and Stefan Lumiere, another former Visium portfolio manager by the prosecutors.
Major cases such as that of hedge fund manager Raj Rajaratnam and Steven A. Cohen's firm SAC Capital Advisors have been successfully brought to a conclusion by Bharara. However since December 2014 when a federal appeals court in Manhattan voided his convictions of hedge fund managers Todd Newman and Anthony Chiasson, such cases became tougher to prosecute. Traders had to know the people who provided inside tips received something consequential in exchange had to be established by prosecutors, the court had said.
Bharara was accused of "stretching the facts and law to try to transform entirely innocent trading decisions into a crime" by Barry Berke, a lawyer for Valvani, in a statement.
Valvani was described as "an innocent man whose investment decisions were always based on rigorous and entirely appropriate research and analysis" by Berke.
In the U.S. District Court in Manhattan, Valvani, 44, of Brooklyn, New York, pleaded not guilty to five counts including securities fraud, wire fraud and conspiracy. He was freed on $5 million bond secured by his home.
Visium oversees about $7 billion of assets and was funded in 2005 by Jacob Gottlieb, who has a medical degree. Investors asked to redeem about $1.5 billion after news of the federal probes surfaced, The Wall Street Journal said last month.
"I am deeply saddened by today's events," Gottlieb said in an email. Visium was not charged.
Centered on "political intelligence" that Johnston got from his former colleague at the FDA, Valvani's alleged scheme ran from 2005 to 2011.
Valvani asked Visium chief financial officer in a Jan. 6, 2010 email to award a raise even though Visium paid Johnston hundreds of thousands of dollars over the years, according to court papers.
(Source: www.reuters,com)
By gaining advance word about U.S. Food and Drug Administration approvals of generic drug applications, Sanjay Valvani of Visium Asset Management LP has been accused of fraudulently making $25 million by U.S. Attorney Preet Bharara in Manhattan.
Gordon Johnston, a consultant who got tips from a friend and former FDA colleague still working at the agency was the provider of the inside information, prosecutors said.
Prosecutors said that Christopher Plaford, then a Visium portfolio manager, made his own illegal trades from the tips that were passed on to him by Valvani.
"Sadly these are schemes we see time and time again, where lies and use of non-public information profits those conducting the crimes, and everyday investors lose out," FBI Assistant Director-in-Charge Diego Rodriguez said in a statement.
Allegations of fraudulently inflating the value and liquidity of a bond fund they oversaw by getting "sham" price quotations from brokers, in an effort to prevent investors from demanding their money back have been leveled against Plaford and Stefan Lumiere, another former Visium portfolio manager by the prosecutors.
Major cases such as that of hedge fund manager Raj Rajaratnam and Steven A. Cohen's firm SAC Capital Advisors have been successfully brought to a conclusion by Bharara. However since December 2014 when a federal appeals court in Manhattan voided his convictions of hedge fund managers Todd Newman and Anthony Chiasson, such cases became tougher to prosecute. Traders had to know the people who provided inside tips received something consequential in exchange had to be established by prosecutors, the court had said.
Bharara was accused of "stretching the facts and law to try to transform entirely innocent trading decisions into a crime" by Barry Berke, a lawyer for Valvani, in a statement.
Valvani was described as "an innocent man whose investment decisions were always based on rigorous and entirely appropriate research and analysis" by Berke.
In the U.S. District Court in Manhattan, Valvani, 44, of Brooklyn, New York, pleaded not guilty to five counts including securities fraud, wire fraud and conspiracy. He was freed on $5 million bond secured by his home.
Visium oversees about $7 billion of assets and was funded in 2005 by Jacob Gottlieb, who has a medical degree. Investors asked to redeem about $1.5 billion after news of the federal probes surfaced, The Wall Street Journal said last month.
"I am deeply saddened by today's events," Gottlieb said in an email. Visium was not charged.
Centered on "political intelligence" that Johnston got from his former colleague at the FDA, Valvani's alleged scheme ran from 2005 to 2011.
Valvani asked Visium chief financial officer in a Jan. 6, 2010 email to award a raise even though Visium paid Johnston hundreds of thousands of dollars over the years, according to court papers.
(Source: www.reuters,com)
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