The Securities and Exchange Commission has filed a civil action against seven individuals over a rampant insider trading scheme which generated more than USD3.7 million in profits and losses avoided for a family and certain friends over a five year period.
From at least 2001 through 2005, the individuals, including lawyers and accountants, participated in a scheme to trade in the stock and option contracts of Taro Pharmaceuticals Industries, Ltd., an Israeli-based publicly traded pharmaceutical company, ahead of eight earnings announcements and five FDA approval announcements. In the later stages of the scheme, the defendants broadened the scheme by trading on information stolen from Pricewaterhouse Coopers LLP and Ernst & Young, LLP concerning two possible mergers.
The SEC has alleged that Zvi Rosenthal, a Vice President at Taro, abused his position at Taro by systematically stealing material, nonpublic information concerning 13 separate company announcements, including earnings results and pending generic drug approvals by the Food and Drug Administration. Rosenthal then traded on the information and passed it on to his family members who then traded in Taro stock and options.
Typically, Rosenthal provided information to his son, Amir Rosenthal who traded in personal accounts he controlled, and in the account of the family- owned and controlled hedge fund, Aragon Partners, LP. Amir Rosenthal also tipped his brothers, Oren Rosenthal and Ayal Rosenthal; his father-in-law, Bahram Delshad ; his best friend, David Heyman; and his work supervisor, Young Kim, with information he received from his father, and each of them traded. The complaint further alleges that in its later stages, certain of the defendants broadened the scheme to include trading on nonpublic information stolen from entities other than Taro.