Indian-Origin US Hedge Fund Manager Charged With Insider Trading

Sanjay Valvani allegedly made gains of up to $32 million with the help of a former US government official.

Sanjay Valvani departs Federal Court after a hearing following his arrest in New York, US, 15 June 2016. (Photo: Reuters)

An Indian-origin hedge fund manager was on Thursday charged by the Securities and Exchange Commission (SEC) with insider trading after he reaped unlawful profits with the help of tips from a former US government official.

Sanjay Valvani (44) made unlawful gains of nearly $32 million for hedge funds investing in health care securities with the help of Gordon Johnston, former employee of Food and Drug Administration who deceptively obtained confidential information.

In the criminal complaint, Valvani has been charged with five counts including securities fraud, defrauding the US and wire fraud. These charges carry a maximum fine of $5 million.

In parallel actions, the office of US Attorney for the Southern District of New York, Preet Bharara, also announced criminal charges against Valvani and Johnston.

Johnston allegedly funnelled to details of his conversations with FDA personnel to Valvani, including those of a close friend he mentored during his time at the agency.

Valvani then traded in advance of public announcements concerning FDA approvals for such companies as Momenta Pharmaceuticals, Watson Pharmaceuticals, and Amphastar Pharmaceuticals.

We allege that Valvani’s formula for trading success was tapping Johnston to abuse his position of trust as a generic industry representative to the FDA and underhandedly obtain confidential information from his friends and former colleagues at the FDA.

Andrew Ceresney, Director of the SEC’s Division of Enforcement

The SEC further alleges that Valvani in turn tipped off fellow hedge fund manager Christopher Plaford, who is charged in a separate complaint with insider trading on this non-public information.

Plaford allegedly made approximately $300,000 by trading based on inside information in hedge funds he managed.