- The Securities and Exchange Commission has settled with a former Food and Drug Administration official who allegedly played a key role in an insider trading scheme involving the now closed hedge fund Visium Asset management.
- Gordon Johnston, the ex-FDA official in question, agreed to pay the SEC a disgorgement of $108,000, roughly what Johnston apparently received from Visium as a paid consultant.
- According to the SEC, Johnston disguised his role as a consultant and passed on confidential information about pending generic approvals, such as a copycat drug to Sanofi's anticoagulant Lovenox. Visium's star hedge fund manager Sanjay Valvani then allegedly used that information to place illegal trades.
Johnston worked at the FDA's Office of Generic Drugs for about a dozen years before joining a generic drug trade association, where he allegedly used his connections and access with FDA officials to obtain non-public information about approvals.
After receiving tips from Johnston, Valvani made trades ahead of announcements regarding FDA approvals for drugs made by companies such as Momenta Pharmaceuticals, Watson Pharmaceuticals and Amphastar Pharmaceuticals, the SEC said when the charges were announced in June. Altogether, tips from Johnston helped Valvani earn an estimated $32 million in unlawful profits.
In addition to the disgorgement of $108,000, Johnston will pay the SEC an additional $19,496.03 in interest.
Charges against Valvani, who has since died of apparent suicide, were dropped but the SEC plans to continue prosecution against two other former Visium employees allegedly involved in a separate insider trading case involving Valvani.
Johnston's case is one of the more high-profile examples of insider trading involving the FDA and the pharamceutical sector in recent years. Johnston and Valvani's actions received even more attention than usual as the charges brought against them played a role in the unraveling of the once $8 billion hedge fund.
U.S. District Judge Katherine Polk Failla approved the settlement reached by the SEC and Johnston in a judgment filed Nov. 14. The case is U.S. SEC v. Valvani et al, case number 1:16-cv-04512, in the U.S. District Court for the Southern District of New York.