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SEC Charges 03 29 2011

SEC Charges 03 29 2011

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Published by: mannkindfan on Mar 09, 2012
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SEC Charges FDA Chemist With Insider Trading Ahead ofDrug Approval Announcements
Washington, D.C., March 29, 2011
– TheSecurities and Exchange Commission todaycharged a U.S. Food and DrugAdministration (FDA) chemist with insidertrading on confidential information aboutupcoming announcements of FDA drugapproval decisions, generating more than$3.6 million in illicit profits and avoidedlosses.The SEC alleges that Cheng Yi Liang illegallytraded in advance of at least 27 publicannouncements about FDA drug approvaldecisions involving 19 publicly tradedcompanies. Some announcementsconcerned the FDA’s approval of new drugswhile others concerned negative FDAdecisions. In each instance, he traded in the same direction as theannouncement. Liang went to great lengths to conceal his insider trading.He traded in seven brokerage accounts, none of which were in his name.One belonged to his 84-year-old mother who lives in China.
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SEC Complaint Litigation Release No. 21907 In a parallel action, criminal charges filed by the Department of Justiceagainst Liang were unsealed today. “Liang victimized both the investors who were disadvantaged by his theft of inside information and the American citizens whose trust he violated byplacing private gain above public good,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.Daniel M. Hawke, Chief of the SEC’s Market Abuse Unit, added, “The insidertrading laws apply to employees of the federal government just as they doto Wall Street traders, corporate insiders, or hedge fund executives. Manygovernment agencies like the FDA routinely possess and generateconfidential market-moving information. Federal employees who
Chart: Trackingthe Trades
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Page 1of 3SEC Charges FDA Chemist With Insider Trading Ahead of Drug Approval Announceme...2/26/2012http://www.sec.gov/news/press/2011/2011-76.htm
misappropriate such information to engage in insider trading risk exposingthemselves to potential civil and criminal charges for violating the federalsecurities laws.” According to the SEC’s complaint filed in the U.S. District Court for theDistrict of Maryland (Greenbelt Division), Liang works in the FDA’s Centerfor Drug Evaluation and Research. Beginning as early as July 2006, Liangpurchased shares for a profit before 19 positive announcements regardingFDA decisions, shorted stock for a profit before six negativeannouncements, and sold shares to avoid losses before two negativeannouncements.For example, the SEC alleges that Liang traded in advance of an FDAannouncement approving Clinical Data’s application for the drug Viibryd.Liang accessed a confidential FDA database that contained criticaldocuments and information about the FDA’s review of Clinical Data’sapplication, and then used that information to purchase more than 46,000shares of Clinical Data at a cost of more than $700,000. After the marketsclosed on Friday, Jan. 21, 2011, the FDA issued a press release approvingViibryd. Clinical Data’s stock price rose by more than 67 percent thefollowing Monday and Liang sold his entire Clinical Data position in less than15 minutes for a profit of approximately $380,000.The SEC alleges that Liang used the trading profits for his own personalbenefit. Checks totaling at least $1.2 million were written from the accountshe used for trading to a bank account in his name, to him or his wifedirectly, or to credit card companies to pay off balances in accounts in hisor his wife’s name. Nearly $65,000 worth of checks were written from thebrokerage accounts to car dealerships to purchase vehicles later registeredto Liang and his wife.The SEC’s complaint alleges that Liang violated Section 17(a) of theSecurities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks a permanent injunction againstfuture violations, disgorgement of unlawful trading profits and lossesavoided plus prejudgment interest, and a financial penalty. The SEC’scomplaint names Liang’s wife Yi Zhuge and the account holders for theseven trading accounts he used – Liang’s mother Hui Juan Chen, his sonAndrew Liang, Shuhua Zhu, Zhongshan Chen, and Honami Toda – as relief defendants for the purpose of recovering ill-gotten funds to which theyhave no legitimate claim. Criminal charges by the Department of Justiceagainst Andrew Liang were unsealed today in the District of Maryland.The SEC’s investigation was conducted by Deborah Tarasevich, CarolynWelshhans, Owen Granke, and Ricky Sachar – members of the SEC’sMarket Abuse Unit in Washington, D.C. The SEC’s litigation effort will be ledby Matthew Martens and David Williams. The SEC thanks the Department of Justice’s Criminal Fraud Section, the Federal Bureau of Investigation, theDepartment of Health and Human Services Office of Inspector General, andthe U.S. Attorney’s Office for the District of Maryland for their ongoingassistance in this matter. The SEC’s investigation is continuing.# # #For more information about this enforcement action, contact:
Page 2of 3SEC Charges FDA Chemist With Insider Trading Ahead of Drug Approval Announceme...2/26/2012http://www.sec.gov/news/press/2011/2011-76.htm

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