Hedge Fund Manager Charged In Insider Trading Case Commits Suicide

Last week, we reported on the historic insider trading bust that took place at the soon-to-be-sold (and liquidated) Visium Capital, in which, among other accusations, U.S. Attorney Preet Bharara in Manhattan charged Sanjay Valvani of fraudulently making $25 million by gaining advance word about FDA approvals of generic drug applications.

Prosecutors said the inside information was provided by Gordon Johnston, a consultant who got tips from a friend and former FDA colleague still working at the agency. Valvani passed some of these tips to Christopher Plaford, then a Visium portfolio manager, who made his own illegal trades, prosecutors said. Valvani pleaded not guilty and was released on $5 million bail.

Today Dow Jones reported that the former Visium manager, Sanjay Valvani who was at the core of the Visium bust, has allegedly taken his life.

  • BREAKING: Sanjay Valvani, Visium hedge fund manager charged in insider trading case, found dead this morning

More from the WSJ:

Mr. Valvani, 44 years old, was found by his wife in the bedroom of their Brooklyn home with a slash wound to his neck, a police official said. He was pronounced dead around 6:30 p.m. Monday.

 

"This is a horrible tragedy that is difficult to comprehend,” Mr. Valvani’s attorneys, Barry Berke and Eric Tirschwell, said in a statement. “Sanjay Valvani was a loving father, husband, son and brother and committed friend, colleague and mentor. We hope for the sake of his family and his memory that it will not be forgotten that the charges against him were only unproven accusations and he had always maintained his innocence.”

 

It will be up to the New York City Office of Chief Medical Examiner to determine the exact cause of death, but responding officers recovered a knife and a suicide note near Mr. Valvani’s body, the police official said.

 

Mr. Valvani most recently had been working as a portfolio manager of the hedge fund firm Visium Asset Management, LP.

 

His death comes less than a week after the U.S. Attorney Preet Bharara unveiled charges against him, accusing him of trading on confidential information about generic drug approvals. A second portfolio manager at the firm pleaded guilty in connection with similar trades.

 

For those who missed the original story, here are the details.

Sanjay Valvaniwas charged on June 15 with trading on confidential tips about drug approvals. The bust is among the largest insider trading cases since a court ruling in 2014 made it more challenging for prosecutors to pursue the culprits.

Preet Bharara, Indian American U.S. attorney in Manhattan, N.Y., accused Visium Asset Management LP’s Valvani of fraudulently making $25 million courtesy of advance information about Food and Drug Administration approvals of generic drug applications.

According to prosecutors, consultant Gordon Johnston, a former deputy director of the FDA office of generic drugs, provided Valvani the information after receiving a tip from a friend and former FDA colleague still working there.

Valvani then turned over some of the tips to then-Visium portfolio manager Christopher Plaford who made his own illegal trades, prosecutors added. The alleged scheme is said to have gone on from 2005 through 2011.

Visium is said to have paid Johnston hundreds of thousands of dollars over the years, but Valvani asked its chief financial officer in a Jan. 6, 2010 email to award a raise, according to court papers.

Prosecutors said Johnston sent tips about Momenta Pharmaceuticals’ effort to win FDA approval for the first generic equivalent to Sanofi’s Lovenox, for treating deep vein thrombosis. After Momenta won approval in July 2010, causing its stock to rise 82 percent in one day, Valvani made $25 million from selling his Momenta stock, and closing bets that Sanofi stock would fall because of the new competition, prosecutors added.

The SEC said Valvani reaped another $7 million by later selling Momenta short, based on tips that Watson Pharmaceuticals Inc. might also win approval for a Lovenox generic.

The scheme helped Valvani earn $11.5 million in bonuses in 2010 and another $10.5 million in 2011. Prosecutors said Valvani called Johnston in January 2011 to end their relationship.

Valvani was a 44-year-old Brooklyn resident, who pleaded not guilty to the five counts, which included security fraud, wire fraud and conspiracy. He was released on $5 million bond.

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As for Visium, Bloomberg reports that the firm will liquidate the main Balanced Fund, as well as its Institutional Partners Fund, Equity Alpha Fund and Equity Alpha UCITS Fund, according to a letter to investors. Its multi-sector hedge fund is being sold to AllianceBernstein LP. As of last year, Visium managed five hedge funds and a mutual fund, and was seeking to raise $500 million for a private equity vehicle. The letter didn’t discuss the private equity fund.

Developing story.