Five people were recently issued insider trading charges by the Securities and Exchange Commission.
The accusations stem from trading that took place before the announcement of an offer by Alexion Pharmaceuticals Inc. to purchase Portola Pharmaceuticals Inc. in May 2020, according to a June 29 news release.
“This case shows our continuing commitment to rooting out those who cheat the system by misusing material nonpublic information,” Thomas P. Smith Jr., associate director of the SEC’s New York regional office, said in the release. “These traders made millions of dollars by exploiting information about an upcoming merger that was supposed to have been held in strict confidence.”
Four of the defendants reportedly made more than $2.3 million in ill-gotten gains from trading on nonpublic information they either directly or indirectly learned from the fifth defendant, or they helped others make more than $1.7 million in trading profits, the release reported.
Shawn Cronin, the police chief in Dighton, Mass., was reportedly given access to secret information regarding the transaction, by Joseph Dupont, vice president and member of the Alexion acquisition team, according to the release. A second close confidant, Jarett Mendoza, and a family friend, Stanley Kaplan, are said to have received the information from Cronin, after which they advised him on trading tactics.
Kaplan allegedly gave the details to Paul Feldman, a friend and coworker, the release said. According to the SEC's complaint, Cronin, Mendoza, Kaplan and Feldman bought Portola stock or out-of-the-money call options based on the important, nonpublic information they had access to, before the announcement.
Kaplan and Feldman allegedly shared the information with other family members and acquaintances who then made money trading, the release reported. Portola's stock price rose by more than 130% the day after the purchase announcement.
The SEC alleged the defendants' roughly ill-gotten proceeds were as follows: Mendoza received $39,000, Kaplan got $472 000, Cronin got $72,000, and Feldman got $1.73 million, the release said. An extra $1.7 million was made by the other traders who were purportedly given insider information by either Kaplan or Feldman.
"Let's hope our golden goose will continue to lay golden eggs," Kaplan reportedly texted Feldman in Russian after seeing their gains, according to the release.
