A recent case involving an insider-trading ring highlights the importance of reporting fraud to the federal government. Under the Securities and Exchange Commission (SEC) whistleblower program, a person who voluntarily provides the government with original, actionable information concerning a past, ongoing, or potential violation of U.S. securities laws is entitled to financial compensation if the information leads to the recovery of at least $1 million. And although the case described below doesn’t appear to have involved a report under the SEC whistleblower program, it is a good example of the kind of case that would qualify a whistleblower for significant financial compensation following recovery.
The Facts Around this Insider-Trading Ring
U.S. Prosecutors have brought insider-trading charges against a restaurateur who’s allegedly at the center of a three-continent insider-trading ring. The defendant allegedly received secret corporate information from his father, who was an employee of a large pharmaceutical company. It is alleged that the defendant then passed this information along to an accomplice who used it to make highly profitable stock trades.
The government claims that the defendant was motivated to share stock tips with his accomplice, who is now a fugitive from justice, due to a $500,000 investment that the accomplice’s wife made in the defendant’s nutrition business.
The defendant allegedly passed along information regarding three pieces of corporate news with which the accomplice used to make profitable stock trades Specifically, the defendant’s accomplice used the insider information to make nearly $5 million. The information the accomplice received concerned the pharmaceutical company’s decision to remove a leukemia drug from the market based on safety concerns. The pharmaceutical company’s co-founder claimed that this news was a “potential company killer,” and it caused the company’s shares to drop nearly 70% when it was announced.
Prosecutors claim that the defendant then tipped the accomplice off several weeks later when the U.S. Food and Drug Administration agreed to place the leukemia drug back on the market. In addition, the accomplice was tipped off regarding an unsolicited bid by another company to purchase the pharmaceutical company.
The defendant has been jailed since his arrest and recently informed the judge in his case that he would not testify in his own defense. If convicted, the defendant would face up to eight years in prison.
Do You Have Information About Financial Fraud?
If you have information that an entity or individual has committed federal securities fraud, you may be entitled to financial compensation. As a whistleblower, you have the opportunity to help protect the public and maintain trust in the financial markets while being rewarded handsomely for your efforts. However, in order to make sure that you report this information correctly, you need an SEC whistleblower attorney on your side. At Newman & Shapiro, we’ll provide you with first-rate representation and dependable service in your SEC whistleblower case. Please contact us today to learn more about your rights under the SEC whistleblower program.