The Securities and Exchange Commission dropped its insider trading case against Diopsys CEO Joseph Fontanetta, whom it had accused of tipping off a Diopsys investor about Johnson & Johnson’s 2005 acquisition of Animas Corp.

The Diopsys investor, Burr McKeehan, settled the SEC case against him for $384,000, but without making any admission of guilt. Despite that settlement, and Fontanetta’s admission that he discussed the impending Animas buyout with McKeehan, the federal watchdog agency decided to call off the civil suit.

The lawsuit alleged that Fontanetta learned of the impending deal through his connections on the Diopsys board, which included Animas CEO Katherine Crothall and Diopsys co-founder Walter Greenfield, whose wife Audrey Greenfield was executive vice president of clinical marketing and sales for Animus. Knowing that the deal was afoot and eager to land McKeehan as an investor in Diopsys, the lawsuit alleged, Fontanetta told McKeehan about the Animas buyout during a Dec. 14, 2005, phone conversation.

Minutes later, according to the lawsuit, McKeehan reversed his month-long selloff of Animus stock and began buying again. That day and the next he snapped up 30,000 shares, earning a $183,018 windfall after news of the acquisition broke and Animus’ stock price soared 32 percent.

Although he admitted to telling McKeehan about the deal, Fontanetta claimed he came by his knowledge of the acquisition through lawful, public means. He denied unlawfully learning of the buyout from Walter Greenfield, saying he deduced the sale was impending from Internet chat boards, news stories about Animas and a hunch based in part on an Animas employee’s remark about Crothall’s schedule. Fontanetta also denied expecting or receiving any personal gain in exchange for tipping off McKeehan.