Visium's Valvani charged with insider trading on FDA leaks

Thu Jun 16, 2016 12:58am EDT
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By Jonathan Stempel

NEW YORK (Reuters) - A Manhattan hedge fund manager was charged on Wednesday with trading on confidential tips about drug approvals, in one of the biggest insider trading cases since a 2014 court ruling made it harder for U.S. prosecutors to pursue them.

U.S. Attorney Preet Bharara in Manhattan accused Sanjay Valvani of Visium Asset Management LP of fraudulently making $25 million by gaining advance word about U.S. Food and Drug Administration approvals of generic drug applications.

Prosecutors said the inside information was provided by Gordon Johnston, a consultant who got tips from a friend and former FDA colleague still working at the agency.

Valvani passed some of these tips to Christopher Plaford, then a Visium portfolio manager, who made his own illegal trades, prosecutors said.

"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.

Prosecutors also accused Plaford and Stefan Lumiere, another former Visium portfolio manager, 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.

"AN INNOCENT MAN"   Continued...

Sanjay Valvani departs Federal Court after a hearing following his arrest in New York, U.S., June 15, 2016.  REUTERS/Lucas Jackson