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FDA scientist charged with insider trading

The US Department of Justice and Securities and Exchange Commission have charged an FDA chemist alleging that he traded pharmaceutical stocks based on confidential information about drug approval decisions

The US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) have each charged a Food and Drug Administration (FDA) chemist with insider trading, alleging that he made millions by trading pharmaceutical stocks based on confidential information about drug approval decisions before they were publically announced.   

The Justice Department said it has arrested Cheng Yi Liang, who worked in the FDA's Center for Drug Evaluation and Research, and his son in Maryland in connection with an alleged $2.27m insider trading scheme. The criminal complaint charges both men with conspiracy to commit securities and wire fraud relating to their trading of stock in Clinical Data, Vanda Pharmaceuticals, Progenics Pharmaceuticals, Middlebrook Pharmaceuticals and Momenta Pharmaceuticals.  

According to the SEC, the scientist illegally traded stocks before at least 27 public announcements about FDA decisions, both positive and negative, for 19 companies beginning in 2006. To conceal the illegal activity, he allegedly used seven brokerage accounts under names other than his own.

Among other illicit activity, the chemist accessed a confidential FDA database containing information regarding Clinical Data's marketing application for the antidepressant Viibryd (vilazodone hydrochloride)  and used the information to purchase more than $700,000 of the company's stock just before the FDA announced its approval of the drug and the value of the stock sky-rocketed by nearly 70 per cent. Liang then sold the stock for a profit of about $380,000, the SEC charges. 

30th March 2011

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