Hedge Fund Exec Accused of Paying Former FDA Official for Inside Information Found Dead in Apparent Suicide

Published: Jun 24, 2016

Hedge Fund Exec Accused of Paying Former FDA Official for Inside Information Found Dead in Apparent Suicide June 21, 2016
By Alex Keown, BioSpace.com Breaking News Staff

NEW YORK – A former hedge fund manager indicted last week for insider trading after gaining generic drug approval information from a U.S. Food and Drug Administration (FDA) source, was found dead in his New York apartment Monday night, according to news reports.

Sanjay Valvani was found in his Brooklyn apartment by his wife. He allegedly left a suicide note, CNN reported this morning.

Valvani of Visium Asset Management pleaded not guilty in court last week after the U.S. government charged him and and Steffan Lumiere, a former Visium portfolio manager, with using inside information to buy stocks of companies that were about to have generic drugs approved by the U.S. Food and Drug Administration. According to the U.S. attorney, Valvani and Lumiere acquired their inside information from Gary Johnston, a former FDA official and consultant to Visium. The three conspired together for a six-year period, from 2005 to 2011, according to the government. The group is accused of making approximately $25 million through the use of the insider information.

It is unknown at this time how the court case will proceed following Valvani’s suicide.

According to the indictment, Valvani tasked Johnston with obtaining highly confidential and material nonpublic information from the FDA about pending generic drug Abbreviated New Drug Applications and related citizen petitions. Part of the ANDA includes a FDA tracking document, which includes estimation timeline and likelihood of approval.

Manhattan-based U.S. Attorney Preet Bharara said Johnston has maintained a friendship with at least one unnamed FDA official who remains employed by the regulatory agency. That friend was one who shared information about the generic drug approvals.

Valvani faces five charges: one count of conspiracy to convert United States property, to commit securities fraud and to defraud the United States; two counts of securities fraud; one count of conspiracy to commit wire fraud; and one count of wire fraud.

Lumiere faces three counts: one count of conspiracy to commit securities fraud and wire fraud; one count of securities fraud; and one count of wire fraud. Lumiere did not enter a plea when he was in court last week.

Johnston pleaded guilty to four counts: one count of conspiracy to convert United States property, to commit securities fraud, and to defraud the United States; one count of securities fraud; one count of conspiracy to commit wire fraud; and one count of wire fraud.

Another hedge fund manager, Christopher Plaford of Investment Adviser-A, also used the information to execute trades, the government said. Plaford pleaded guilty to seven counts: one count of conspiracy to commit securities fraud and wire fraud; one count of securities fraud; one count of conspiracy to defraud the United States and to convert United States property; one count of conversion of United States property; one count of conspiracy to convert United States property, to commit securities fraud, and to defraud the United States; one count of securities fraud; and one count of conspiracy to commit wire fraud.

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