BEACON TRANSCRIPT – A former manager at the Visium Asset Management LP was taken into custody by the FBI following allegations of insider trading. Allegedly, the hedge fund manager and a colleague received tips on drug approvals from a former supervisor at the Federal Drug Administration.
According to the FBI, the FDA official had worked at the agency’s office of generic drugs but he was able to get tips from a colleague who was still working there. The FDA employee and one of the Visium managers pleaded guilty this month.
But Visium problems with the law are not over. Another employee was charged with wire and security fraud in a fixed-income fund. The hedge-fund declined to comment on the recent event but its founder Jacob Gottlieb noted he was “deeply saddened” with the situation.
Yet, finding absolute evidence that confidential federal data is leaked to Wall Street is a very strenuous task. The FBI has been keeping an eye on Washington and Wall Street investors for years to track any insider trading instances.
But such cases often fall apart because of lack of evidence and the pressures coming from both power centers. Plus, the line between confidential and non-confidential information is rather hazy.
The Securities and Exchange Commission, which has recently filed civil lawsuits against the Visium traders, managed in 2015 to reach a $375,000 settlement with Marwood Group, whose employees obtained info that was not designed to reach the public from federal employees. But that settlement was possible because the group agreed to admitt to the wrongdoings.
In 2013, the SEC also found that federal employee managing Medicare and Medicaid leaked info to Wall Street investors which would have benefited health insurers. Yet the investigation is ongoing.
But in the case of Visium, the insider trading was blatant despite the obstacles set in place by a 2014 New York appeals-court ruling for state prosecutors who manage such cases.
Manhattan prosecutors found that Visium’s Sanjay Valvani, who is now placed on leave by the health-care-focused fund, got tips on when the FDA was about to approve generic drugs from Gordon Johnston, a former employee of the agency.
Allegedly, Valvani used the confidential information to obtain a $25 million profit after trading on two big pharma groups that were waiting to put the generic drugs on sale . On Wednesday, the hedge fund manager pleaded not guilty.
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