Two Indian-origin people, including a former Pfizer employee, have been charged with insider trading by federal authorities for their scheme to reap illicit profits by trading on information about the results of a COVID-19 medicine’s clinical trials by the pharmaceutical giant.
Amit Dagar, a former Pfizer employee, and his close friend and business partner Atul Bhiwapurkar were charged on Thursday by the US Securities and Exchange Commission (SEC) for their scheme to reap illicit profits through insider trading.
In a parallel action, the US Attorney’s Office for the Southern District of New York also announced criminal charges against the duo.
Dagar, 44, of Hillsborough, New Jersey, was arrested on Thursday and was charged with four counts of securities fraud, each of which carries a maximum sentence of 20 years in prison, and one count of conspiracy to commit securities fraud, carrying a maximum sentence of five years in prison.
Bhiwapurkar, 45, of Milpitas, California, was also arrested on Thursday and charged with two counts of securities fraud and one count of conspiracy to commit securities fraud.
The authorities allege that in November 2021, Dagar and Bhiwapurkar participated in an insider trading scheme to reap illicit profits from options trading based on inside information about the results of clinical trials of Paxlovid, a medicine used to treat COVID-19.
The drug trial, in which Dagar was employed as a senior statistical program lead, began in July 2021 as part of the company’s efforts to address the global health pandemic.
According to the SEC’s complaint, the duo traded ahead of Pfizer’s November 5, 2021, announcement that a randomized double-blind study of its COVID-19 antiviral treatment was successful after Dagar learned material, nonpublic information about the trial’s success, the day before the Paxlovid announcement.
Specifically, the SEC alleges that Dagar’s supervisor informed him via chat that “we got the outcome,” there was a “lot of work lined up,” and that there would be a “press release tomorrow,” to which Dagar responded with “oh really” and “kind of exciting.” Following that announcement in which Pfizer’s CEO referred to the news as a “game-changer” in the global efforts to “halt the devastation” of the pandemic, the company’s stock price increased by nearly 11 per cent, the largest single-day price move in the stock since 2009.
Several hours after that exchange, Dagar allegedly purchased short-term, out-of-the-money Pfizer call options, including options that expired the very next day, and then tipped Bhiwapurkar, who also purchased similar call options in Pfizer.
It also alleges that Dagar’s and Bhiwapurkar’s trading generated illicit profits worth approximately USD 214,395 and USD 60,300, respectively, which amounted to one-day investment returns of 2,458 per cent and 791 per cent.
“As alleged in our complaint, Amit Dagar misused his access to confidential clinical trial results to enrich himself and his friend, Atul Bhiwapurkar,” said Joseph Sansone, Chief of the Market Abuse Unit.
“Dagar and Bhiwapurkar allegedly leveraged this information by trading out-of-the-money call options to generate massive one-day returns,” Sansone said.
The SEC’s complaint, filed in the US District Court for the Southern District of New York, charges Dagar and Bhiwapurkar with violating the antifraud provisions of the Securities Exchange Act of 1934 and Exchange Act Rule and seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties.
Source: PTI
