September 27, 2017
By Alex Keown, BioSpace.com Breaking News Staff
CHICAGO – The U.S. Attorney’s Office in Chicago charged Jason Napodano, a former Zacks biotech analyst, with securities fraud over allegations of insider trading while he was providing coverage of certain companies during his time as a senior biotech analyst.
According to the charges levelled against him, Napodano, of North Carolina, acquired and sold various stocks in companies based on non-public information he obtained while preparing equity research reports. The federal government alleged that Napodano earned approximately $143,000, between October 2012 and May 2015. Prosecutors said prior to the public release of equity research reports that contained positive recommendations about the companies he was researching, “Napodano purchased stock in those companies. He then allegedly sold the stock for a profit after his reports were publicly released and the stock prices of the companies increased.”
If convicted of the criminal charges, Napodano can face up to 20 years in prison.
Napodano helmed Zacks Small Cap Research which focused on penny biotech stocks among others. The U.S. Securities and Exchange Commission said that Napodano authored reports about the companies and included a false disclaimer that he held no financial stake in those companies. In an effort to evade detection, Napodano allegedly limited his profits from each illegal trade by taking small positions and closing the positions shortly after his reports and articles were published, the SEC said.
Napodano agreed to pay his insider trading profits totaling $143,865.48 plus prejudgment interest of $17,620.87 and a penalty of $143,865.48, the SEC said. He will also be barred from trading in penny stocks for the rest of his life.
Napodano was not the only one charged in this scheme. The Justice Department and the SEC also pointed to Bilal Basrai and Bryce Stirton, who both worked at Chicago-based brokerage firm LBMZ Securities. According to the complaint, the three men worked together. Basrai, a managing director at the Chicago firm, allegedly learned non-public information about a secondary stock offering, an in-licensing agreement, and the release date of a research report, and used it to make profitable trades of three companies’ stock, according to the government complaint. The DOJ said that Basrai’s part in the fraud scheme spanned the first seven months of 2014. Basrai has agreed to plead guilty to the charges.
Like Napodano, Basrai agreed to turn over his profits from the alleged scheme that total $39,668.37. He will also pay prejudgment interest of $4,617.89 and a penalty of $39,668.37, the SEC said.
Stirton, who was not included in the DOJ criminal charges, agreed to disgorgement of his insider trading profits totaling $2,218.87 plus prejudgment interest of $257.43 and a penalty of $2,218.87, the SEC said.
The SEC said Basrai and Stirton agreed to be barred from trading penny stocks and from working in the securities industry. Stirton does have the right to reapply to work in the industry after five years, the SEC said.
