Hedge Fund Insider Trading Leads to Stock Fraud Indictment
By John Curran
The results of major clinical trials are a big deal for pharmaceutical companies as well as fertile ground for stock fraud attempts. Many drug makers spend billions of dollars to develop new drugs, especially in growing markets. However, if they fail during studies, prices on the stock market plummet. According to the Associated Press, one hedge fund employee was able to obtain the results and get out of holdings just in time.
An Alzheimer’s disease drug developed by Wyeth and a counterpart was not successful, but federal prosecutors said that Mathew Martoma took $700 million out of the companies prior to a public announcement. Moreover, stock fraud lawsuit lawyers will note that Martoma’s firm made doubly sure it would make money off the bad news by “shorting” both Wyeth and Elan Corp. It is a basic bet that the stock will go down in price, leading to profits on bad news.
Martoma’s legal team argues that it was not an example of securities fraud, and that other factors influenced his decision. It is unclear if other Wyeth drug development programs were also facing problems. However, a review of the joint programs indicates that the Alzheimer’s drug bapineuzumab was the only project worked on by teams from both firms over the past five or so years. While it is possible that there are other explanations that don’t include securities fraud, the odds may become remote.
As noted, people with large positions in major pharmaceutical companies like Wyeth and other multinationals can lose hundreds of millions of dollars after a failed drug trial. The value of knowing trial results can lead to questionable attempts by hedge funds and others to gain any knowledge ahead of time. Unfortunately, those connections are often not available to small investors who then may have to resort to securities fraud lawsuit attorney.
Whether it is a pharmaceutical company or any other making a major product announcement, investors can see huge losses if someone else knew of it ahead of time. If it seems like the moves may have been fraudulent, shareholders need to visit the Securities Fraud, Stock Fraud Investment Class Action Lawsuit Investigation now. Filling out a short form entitles one to a free consultation with an experienced securities fraud lawsuit attorney. While one can write down stock losses on taxes, it does little to offset the costs of going in blind when others may have insider information to ride out any storm.
Updated January 2nd, 2013
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