Pfizer Employee and Associate Charged with Insider Trading Based on Non-Public Drug Trial Results for COVID-19 Treatment
Investment Firm Executive Director Charged with Insider Trading Based on Information Stolen from a Major Investment Bank
SPAC Investors Charged with Insider Trading by Exploiting Their Privileged Access to Information to Engage in Illegal Open Market Trades
Network of Individuals, Including Police Chief, Charged with Insider Trading Based on Inside Information About an Impending Merger
FBI Assistant Director in Charge Michael J. Driscoll said: “The charges announced today center on the defendants’ alleged participation in illegal securities trading based on material, non-public information. Insider trading schemes not only yield ill-gotten gains for those directly involved but also damage the public’s faith in the fairness of our financial markets. Today’s announcement serves as a reminder to anyone attempting to tilt the balance in their direction using insider trading, investigating this illegal behavior is a top priority of the FBI.”
According to the allegations contained in the Indictments filed in federal court and other publicly available information:[1]
United States v. Amit Dagar and Atul Bhiwapurkar
In or about November 2021, AMIT DAGAR and ATUL BHIWAPURKAR participated in an insider trading scheme to reap illicit profits from options trading based on inside information about the results of clinical trials of Paxlovid, a medicine used to treat COVID-19. DAGAR was an employee of Pfizer Inc. (“Pfizer”) and assisted in managing the data analysis in certain clinical drug trials.
On or about November 4, 2021, DAGAR learned that a Pfizer trial of the drug Paxlovid, a medicine designed to treat mild to severe COVID‑19 infection, had produced positive results. The results were confidential and meant to remain so until Pfizer publicized them on or about November 5, 2021.
Later that same day, and while those results remained confidential, DAGAR purchased short-dated, out-of-the-money call options in Pfizer stock. DAGAR also tipped his close friend, ATUL BHIWAPURKAR, about the coming drug results and BHIWAPURKAR also purchased short-dated, out-of-the-money Pfizer call options that expired approximately two weeks later. BHIWAPURKAR also tipped another friend (“Individual-1”), who similarly purchased short-dated, out-of-the-money Pfizer call options that expired approximately three weeks later.
The next day, on or about November 5, 2021, and before the market opened, Pfizer publicly released results of its Paxlovid study. That same day, following the publication of the positive results, Pfizer’s stock price increased substantially, opening — and eventually closing — more than 10% higher than the prior day’s closing price. In the coming weeks, DAGAR, BHIWAPURKAR, and Individual-1 sold their Pfizer call options at significant profits, totaling approximately more than $350,000.
DAGAR, 44, of Hillsborough, New Jersey, who was arrested this morning, has been charged with four counts of securities fraud, each of which carries a maximum sentence of 20 years in prison, and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison.
BHIWAPURKAR, 45, of Milpitas, California, who was arrested this morning, has been charged with two counts of securities fraud, each of which carries a maximum sentence of 20 years in prison, and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison.
United States v. Jordan Meadow
From at least in or about March 2021 through in or about May 2022, JORDAN MEADOW, a registered broker at a brokerage firm based in New York, New York, used inside information stolen from a major investment bank in New York City (“the Investment Bank”) to make millions of dollars in illegal profits trading stock on behalf of himself and his clients. In or about late 2020, MEADOW offered and agreed to provide items of value, such as Rolex watches, to a friend, Steven Teixeira, in exchange MNPI that Teixeira obtained by secretly accessing confidential work documents on a personal laptop computer (the “Laptop”) belonging to Teixeira’s then-girlfriend, an executive assistant at the Investment Bank. The documents on the Laptop contained MNPI about planned corporate acquisitions in which the Investment Bank served as an advisor.
In or around late July 2021, Teixeira secretly accessed confidential work information on the Laptop and learned that in less than a week, Penn National Gaming, Inc. (“Penn National”), was going to acquire Score Media and Gaming Inc. (“Score”), a Canadian digital media company, for approximately $2.2 billion. Teixeira shared this MNPI with a friend, who in turn shared it with MEADOW. MEADOW then purchased more than 769 call option contracts in Score between August 2, 2021, and August 3, 2021, based on the MNPI and also advised a colleague at the brokerage firm where he worked, their clients, and a friend to purchase Score securities. After Penn National’s acquisition of Score was announced publicly on August 5, 2021, MEADOW, his colleague, their clients at the brokerage firm, and MEADOW’s friend sold their holdings in Score for a combined profit exceeding $5 million.
Later, in or around early March 2022, Teixeira secretly accessed confidential work information on his then-girlfriend’s laptop and learned about a planned corporate acquisition of VMWare, an enterprise software company, for approximately $65 billion. Teixeira shared this MNPI with his friend, who in turn shared it with MEADOW. MEADOW purchased over 5,000 shares of VMWare stock, as well as call options contracts in VMWare, between May 9, 2022, and May 18, 2022, and advised his colleague at the brokerage firm to purchase VMWare securities. After there was public reporting that Broadcom was in talks to acquire VMWare, the VMWare holdings of MEADOW and his colleague increased significantly, and they began to sell their VMWare holdings for a combined profit exceeding $100,000.
MEADOW, 34, of Warren, New Jersey, who was arrested this morning, has been charged with six counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.
Also unsealed today were charges against Steven Teixeira, who has pled guilty pursuant to a cooperation agreement.
United States v. Michael Shvartsman, Gerald Shvartsman, and Bruce Garelick
In October 2021, MICHAEL SHVARTSMAN, GERALD SHVARTSMAN, and BRUCE GARELICK together made more than $22 million dollars in illegal profits by trading in securities of Digital World Acquisition Corporation (“DWAC”) based on MNPI about DWAC’s planned but not yet public business combination with a media company founded by former President Donald J. Trump.
As sophisticated investors, MICHAEL SHVARTSMAN, GERALD SHVARTSMAN, and BRUCE GARELICK were invited to invest in DWAC and another special purpose acquisition company (“SPAC”), and after signing non-disclosure agreements, they were provided confidential information about the SPACs, including that a potential target of the SPACs was Trump Media & Technology Group (“Trump Media”). As a condition of receiving this information, the defendants were prohibited by the non-disclosure agreements from disclosing the confidential information they learned or using it to buy and sell securities on the open market. After making initial investments into DWAC through the initial public offering process, GARELICK was given a seat on DWAC’s board of directors, which gave him access to valuable MNPI about DWAC’s plans to merge with Trump Media. After learning MNPI through his role on DWAC’s board, GARELICK provided updates to his alleged co-conspirators — which he called “intelligence” — about the status of the merger negotiations and the timing of a public merger announcement.
In violation of the non-disclosure agreements that they had signed, and in contravention of GARELICK’s duties and responsibilities as a board member, the defendants bought millions of dollars of DWAC securities on the open market before the news of the Trump Media business combination was public. In addition to their own purchases, the defendants also passed DWAC’s confidential information to their friends on a trip to Las Vegas, to MICHAEL SHVARTSMAN’s neighbors, and to GERALD SHVARTSMAN’s employees at a furniture supply store. After DWAC’s merger with Trump Media was announced publicly, the stock and warrant holdings of MICHAEL SHVARTSMAN, GERALD SHVARTSMAN, and BRUCE GARELICK, and those they tipped, significantly increased in value. The defendants and the individuals they tipped then sold their DWAC securities for a significant profit.
MICHAEL SHVARTSMAN, 52, of Sunny Isles Beach, Florida, who was arrested this morning, has been charged with five counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.
GERALD SHVARTSMAN, 45, of Aventura, Florida, who was arrested this morning, has been charged with three counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.
BRUCE GARELICK, 53, of Fort Lauderdale, Florida, who was arrested this morning, has been charged with five counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.
United States v. Joseph Dupont, Shawn Cronin, Slava Kaplan, and Paul Feldman
In 2020, JOSEPH DUPONT, SHAWN CRONIN, SLAVA KAPLAN, a/k/a “Stanley Kaplan,” and PAUL FELDMAN engaged in an insider trading scheme surrounding the announcement of one pharmaceutical company’s acquisition of another. CRONIN, KAPLAN, and FELDMAN collectively made more than $2.2 million dollars in illegal profits by trading in stocks and options based on MNPI that DUPONT misappropriated from his employer.
DUPONT was a vice president at Alexion Pharmaceuticals, Inc. (“Alexion”) and, on January 31, 2020, was informed of Alexion’s upcoming acquisition of Portola Pharmaceuticals, Inc. (“Portola”). Before that acquisition was publicly announced, in April 2020, DUPONT provided MNPI about the acquisition to his childhood friend, CRONIN. Not only were CRONIN and DUPONT childhood friends, but also CRONIN — who, at the time, was a sergeant in the police department of Dighton, Massachusetts, and later served as the chief of police — supervised DUPONT in DUPONT’s capacity as a reserve officer in that police department. Based on the MNPI that DUPONT provided CRONIN, CRONIN purchased shares of Portola stock as well as out-of-the-money call options for Portola stock.
In turn, CRONIN shared MNPI about Portola’s pending acquisition with Jarett Mendoza, another childhood friend of both CRONIN’s and DUPONT’s. CRONIN also assisted Mendoza in purchasing Portola stock in the days before the acquisition was publicly announced.
CRONIN shared MNPI about Portola’s pending acquisition not only with Mendoza, but also with KAPLAN, a friend of CRONIN’s, who was also known to DUPONT. CRONIN shared the MNPI with KAPLAN both so that KAPLAN could trade in advance of the acquisition and so that KAPLAN would assist CRONIN in formulating trading strategies to maximize CRONIN’s own insider trading profits. Based on the MNPI that CRONIN gave to KAPLAN, KAPLAN bought Portola shares and options.
KAPLAN, in turn, shared MNPI about the upcoming acquisition with, among others, FELDMAN, a friend and colleague of KAPLAN’s. Based on the MNPI that KAPLAN gave FELDMAN, FELDMAN aggressively bought Portola call options.
FELDMAN, for his part, shared MNPI about the Portola acquisition with others, including a work colleague.
Alexion’s acquisition of Portola was publicly announced on the morning of May 5, 2020. Portola’s stock increased significantly in value. CRONIN, KAPLAN, FELDMAN, and their tippees sold their shares of Portola and call options for Portola stock, reaping millions of dollars of illegally obtained trading profits.
DUPONT, 44, of Rehoboth, Massachusetts, who surrendered to authorities today, has been charged with one count of Title 15 securities fraud and one count of tender offer fraud, each of which carries a maximum sentence of 20 years in prison, and one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison.
CRONIN, 43, of Dighton, Massachusetts, who surrendered to authorities today, has been charged with three counts of securities fraud under Title 15 and three counts of tender offer fraud, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy to commit securities fraud and tender offer fraud, which carries a maximum sentence of five years in prison;.
KAPLAN, 45, of Hopewell Junction, New York, who was arrested today, has been charged with three counts of securities fraud under Title 15 and three counts of tender offer fraud, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy to commit securities fraud and tender offer fraud, which carries a maximum sentence of five years in prison.
FELDMAN, 48, of Poughquag, New York, who was arrested today, has been charged with six counts of securities fraud under Title 15 and six counts of tender offer fraud, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy to commit securities fraud and tender offer fraud, which carries a maximum sentence of five years in prison.
Also unsealed today were charges against Jarett Mendoza, who has pled guilty pursuant to a cooperation agreement.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendants will be determined by the judge.
Mr. Williams praised the outstanding investigative work of the FBI’s New York and Philadelphia Field Offices. He also thanked the Miami Field Office of the U.S. Department of Homeland Security, Homeland Security Investigations, for its assistance in the investigation in United States v. Michael Shvartsman, Gerald Shvartsman, and Bruce Garelick. He further thanked the Securities and Exchange Commission for its cooperation and assistance across these investigations.
These cases are being handled by the Office’s Securities and Commodities Fraud Task Force. United States v. Dagar and Bhiwapurkar is in the charge of Assistant U.S. Attorney Alex Rossmiller. United States v. Meadow is in the charge of Assistant U.S. Attorney Nicholas Folly. United States v. Michael Shvartsman, Gerald Shvartsman, and Bruce Garelick is in the charge of Assistant U.S. Attorneys Elizabeth Hanft, Nicolas Roos, and Matthew Shahabian. United States v. Dupont, Cronin, Kaplan, and Feldman is in the charge of Assistant U.S. Attorneys Samuel P. Rothschild, Sarah Mortazavi, and Margaret Graham.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictments and the description of the Indictments set forth below constitute only allegations, and every fact described should be treated as an allegation.
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