SEC Prevails In Insider Trading Jury Trial
The Commission prevailed at trial against a corporate insider charged with tipping his friend prior to the announcement of favorable regulatory action on an application to market a drug. The friend not only traded but encouraged others to trade at a poker game and on Facebook. SEC v. Sabrdaran, Civil Action No. 3:14-cv-4825 (N.D. Cal.).
The action centered on the December 17, 2010 announcement that pharmaceutical company InterMune, Inc. had secured the recommendation of European regulatory authorities to market its drug Esbriet in the European Union. On the date of the announcement the share price of InterMune’s NASDAQ traded shares jumped 151% while the price for its call options increased by over 356%.
Defendant Sasan Sabrdaran, a resident of San Francisco, was the director of Drug Safety Risk Management at InterMune. He is a long time friend of defendant Farhang Afsarpour, a British citizen and resident of Manchester, England. Mr. Afsarpour owned a number of restaurants.
In March 2010 InterMune submitted an application for marketing approval for Esbriet to the European Medicines Agency or EMA. The application sought approval to market the drug in the EU. The approval process involves a number of steps and time periods prior to a recommendation for approval by the Medicinal Products for Human Use or CHMP, an advisory board to the EMA. Following the submission of the application InterMune maintained its public statements that it anticipated a CHMP opinion and EU decision in the first half of 2011.
The firm had a small team whose job was to shepherd the application through the regulatory process. Mr. Sabrdaran began working with the team in June 2010 following which he was continually updated. On June 15, 2010, July 23, 2010 and September 15, 2010 the group received communications indicating that the review was going better than the team had anticipated. On November 15, 2010 an EMA employee emailed an InterMune outside consultant that it was probable Esbreit would secure a “positive Opinion.” That view was confirmed over the next two days. The flow of positive information continued in early December 2010. Indeed, during the week of December 6, 2010 the EMA liaison confirmed to the Esbriet Team that the drug would be put up for a positive opinion during the CHMP’s meeting scheduled for the week of December 13, 2010. As the updates came in they were relayed to Mr. Sabraran.
Telephone and text messages indicate that prior to October 10 Mr. Sabrdaran began funneling information about the drug approval process to his friend, defendant Afsarpour. On October 11, 2010 Mr. Afsarpour opened a spread betting account with IG Index, a London based subsidiary of IG Group. Records indicate that subsequently the two men had additional communications.
On December 12, 2010 Mr. Afsarpour held “poker night” at his home. During the evening he announced to a half-dozen friends that they should purchase InterMune securities. He went on to note that the EU would, in his view, render a favorable opinion on the firm’s application to market a drug.
The next day Mr. Afsarpour sent a message on Facebook to a friend, indicating that he had good news — it is “not too late if you have money.” In follow-up communications Mr. Afsarpour agreed to purchase InterMune shares for his friend in exchange for the friend purchasing gold worth about $17,940 for him.
Between December 10, 2010 and December 16, 2010 Mr. Afsoour purchased spread bets on the stock as well as shares. The broker hedged the spread bet positions by purchasing InterMune securities. Following the December 16, 2010 announcement Mr. Afsarpour had profits of $877,369. Others that he tipped also had profits. The complaint alleged violations of Exchange Act Section 10(b). Following trial the jury returned a verdict in favor of the Commission and against Mr. Sabrdaran. Remedies will be considered by the court at a date to be set.