The FBI arrested an FDA chemist and his son on charges that they used inside information about when drugs would be cleared to reap millions in illegal stock market trades.
Cheng Yi Liang, 57, and Andrew Liang, 25, are accused of conspiracy to commit securities and wire fraud, securities fraud, and wire fraud from trades involving Clinical Data Inc. (NSDQ:CLDA), Vanda Pharmaceuticals Inc. (NSDQ:VNDA), Progenics Pharmaceuticals Inc. (NSDQ:PGNX), Middlebrook Pharmaceuticals Inc. (PINK:MBRKQ) and Momenta Pharmaceuticals Inc. (NSDQ:MNTA). The father-and-son duo allegedly pulled down nearly $2.3 million in illicit profits from the trades, according to the U.S. Justice Dept.
Early this year, agents for the inspector general of the U.S. Dept. of Health & Human Services installed software on the elder Liang’s computer at the FDA, where he’d worked as a chemist since 1996, to record screenshots. The virtual wiretap revealed that Liang was using the FDA’s secure database to find out when Clinical Data’s Viibryd anti-depressant would win approval, according to court documents. Liang and his son snapped up 4,875 shares Jan. 18 after learning that Viibryd was slated for approval. They allegedly sold the entire position for nearly $380,000 after the approval was announced Jan. 21, according to the documents.
In another instance, the pair allegedly used their advance knowledge of the May 6, 2009, approval of Vanda’s Fanapt drug to pull down more than $1 million, according to the documents. They allegedly spent some of the take on cars, travel and credit card bills.
Liang and Liang each face five years in prison, fines of $250,000 or twice their gross gain on the conspiracy charges. The wire and securities fraud charges carry a potential prison sentence of 20 years and fines of up to $5 million.