U.S. rekindles expert trading push, charges hedge fund'' s Valvani

© Reuters. To match Special Report SEC/INVESTIGATIONS

By Jonathan Stempel NEW YORK (Reuters) – A portfolio supervisor at hedge fund Visium Asset Management LP was criminally charged on Wednesday with expert trading, in among the biggest such cases given that a 2014 court judgment made it harder for U.S. prosecutors to pursue them. U.S. Attorney Preet Bharara in Manhattan accused Sanjay Valvani of fraudulently making at least $25 million off suggestions from former U.S. Fda main Gordon Johnston about that agency’s approval of pending generic drug applications. Valvani likewise passed some of these suggestions to Christopher Plaford, then a Visium portfolio manager, who made his own unlawful trades, district attorneys said. “Unfortunately these are plans we see time and time once again, where lies and use of non-public details profits those carrying out the criminal activities, and daily financiers lose out,” FBI Assistant Director-in-Charge Diego Rodriguez stated in a statement. The government also implicated Plaford and Stefan Lumiere, another former Visium portfolio supervisor, of fraudulently pumping up the value and liquidity of a fund they supervise by getting “sham” price quotations from brokers, in an effort to prevent financiers from demanding their money back. “AN INNOCENT MAN” Valvani, 44, of Brooklyn, New york city, was charged with 5 counts including securities scams, wire fraud and conspiracy. Lumiere, 45, of New york city, was accuseded of securities fraud, wire scams and conspiracy. Both were detained on Wednesday and anticipated to appear that day in the federal court in Manhattan. Plaford, 38, of Bedford, New York, and Johnston, 64, of Olney, Maryland, pleaded guilty earlier this month to associated charges and are complying with prosecutors. The United States Securities and Exchange Commission filed civil charges versus all 4 offenders. “Sanjay Valvani is an innocent guy whose investment decisions were constantly based upon rigorous and entirely appropriate research and analysis,” his lawyer Barry Berke stated in a statement. Berke likewise accused Bharara of “stretching the facts and law to attempt to change completely innocent trading choices into a criminal offense.” Lumiere’s lawyer Eric Creizman and Plaford’s attorney David Smith declined to comment. Visium and a lawyer for Johnston did not immediately respond to demands for comment. Visium is based in New york city, and was not charged. Bharara has actually won dozens of insider trading convictions over the last several years, including of hedge fund manager Raj Rajaratnam and Steven A. Cohen’s firm SAC Capital Advisors. But he was dealt a big problem when the federal appeals court in New York in December 2014 voided his convictions of hedge fund managers Todd Newman and Anthony Chiasson. That court said that to win convictions, district attorneys needed to reveal that traders knew the people who provided inside pointers got something consequential in exchange. A MOMENTA IDEA Established in 2005 by Jason Gottlieb, who has a medical degree, Visium supervises about $7 billion of possessions. Last month, The Wall Street Journal stated financiers asked to redeem about $1.5 billion after news of the federal probes appeared. The Visium Global multi-strategy fund got 10.2 percent in 2015, and the Visium Well balanced health care fund increased 5.6 percent. Valvani’s supposed scheme ranged from 2005 to 2011, fixated “political intelligence” that Johnston, working as a Visium consultant, obtained from a former associate at the FDA, where he was once deputy director of the Office of Generic Drugs. According to court documents, Visium paid Johnston numerous countless dollars throughout the years, however Valvani asked its primary monetary policeman in a Jan. 6, 2010 email to offer a raise. Johnston “is without question the most valuable consultant I’ve ever worked with and I’m pressing to reinforce the value of the relationship and motivate him to continue to exceed and beyond for our group,” Valvani supposedly composed. District attorneys said he did simply that, sending out ideas about the FDA approval process for the very first generic equivalent to Sanofi SA’s (PA:-RRB- Lovenox, for treating deep vein thrombosis. According to court documents, Valvani made $25 million after a generic from Momenta Pharmaceuticals Inc (O:-RRB- won approval in July 2010, triggering that stock to increase 82 percent in one day. Valvani soon sold his Momenta stock, and liquidated bets that Sanofi’s stock would fall because of the brand-new competitors, prosecutors stated. The SEC said Valvani enjoyed another $7 million by later selling Momenta short, based on tips that Watson Pharmaceuticals Inc might also win approval for a Lovenox generic. These trades assisted Valvani get bonuses topping $11.5 million in 2010 and $10.5 million in 2011, dwarfing his $2.5 million perk in 2009, the SEC stated. District attorneys said Valvani called Johnston in January 2011 to end their relationship, “in the wake of report of expert trading investigations.”

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