Federal prosecutors have issued indictments on what they are calling the most lucrative insider trading scheme ever uncovered.
The former portfolio manager, who resides in Boca Raton, Florida with his wife and three children, was indicted by a federal grand jury. He was arrested last month on charges that he used inside information about a clinical drug trial to help the hedge fund he works for earn nearly $300 million in benefits.
This secret and negative information came from a doctor about an Alzheimer's drug that was in the process of development by two pharmaceutical companies. That doctor's testimony is the main evidence that the prosecutors have against the manager.
The manager then allegedly spoke about this information with the owner of his investment firm. The next day, the firm sold $700 million worth of stock in the pharmaceutical companies.
Those stock values then plunged after the announcement of the disappointing trial results.
This is not the first instance that this particular investment firm has been accused of insider trading. The billionaire owner has also been linked to other questionable trades. Reportedly, the government was hoping to build a case against the owner with information gleaned from this hedge fund manager. However, the manager has yet to implicate his boss, and maintains his innocence that he did not make trades based upon inside information.
As of yet, the owner of the hedge fund has not been charged with any fraud. However, the Securities and Exchange Commission is expected to file a fraud lawsuit against his investment firm.
Source: New York Times, "Former SAC Trader is Indicted," Peter Lattman, Dec. 21, 2012