A former senior accountant at Celator Pharmaceuticals and three others have been charged with trading on inside information about two market-moving announcements by the company, realizing $411,000 in illicit profits.
The U.S. Securities and Exchange Commission said the accountant, Evan Kita, tipped off two friends, Daniel Perez and Richard Yu, after obtaining advance notice that the results of a clinical trial of a Celator leukemia drug were positive and that the company was the target of an impending acquisition.
According to a civil complaint, Kita learned of the trial results at a meeting with Celator’s CFO and of the takeover from friends at the company. Perez and Yu agreed to share their trading profits with him, the SEC said.
Yu allegedly passed on Kita’s tips to his father, who was allegedly the main beneficiary of the scheme, making $347,327 in illicit profits.
In a parallel criminal case, Kita and both Richard and Chiang Yu pleaded guilty on Thursday to securities fraud while Perez was arrested on similar charges. Securities fraud carries a potential penalty of 20 years in prison.
”The investing public relies on accountants and other gatekeepers to safeguard confidential information, not use it for personal profit,” Kelly L. Gibson, associate director of the SEC’s Philadelphia Regional Office, said in a news release. ”When gatekeepers violate that public trust as Kita allegedly did, the SEC is committed to holding them accountable.”
Kita began working as a senior accountant at Celator in June 2015. The SEC said he learned from Celator’s CFO on March 10, 2016 that the results of the drug trial were positive and that the results would be announced early the following week. He allegedly tipped Perez off later the same day.
Celator disclosed the results on March 14, 2016, sending its shares up 432% over the previous day’s closing price.
Kita left Celator in April 2016 but according to the SEC, two employees who were his close friends told him the following month about the impending acquisition of the company by Jazz Pharmaceuticals.
“Get your ducks in line on your end,” he allegedly instructed Perez via an encrypted smartphone app.