Son, Tipped By Father, Convicted of Insider Trading

As 2019 drew to a close a father and son resolved an insider trading case with the Manhattan U.S. Attorney’s Office. The action centered on trading while in possession of inside information about a pharmaceutical company. Congressman Christopher Collins, who sat on the board of the company, tipped his son who, avoiding losses. U.S. v. Collins, No. 18 Crim 567 (S.D.N.Y.); SEC v. Collins, Civil Action No. 18-cv-7128 (S.D.N.Y.).

Yesterday another father and son insider trading case centered on events at a pharmaceutical company was at least partially resolved. Telemaque Lavidas was found guilty by a jury in Manhattan of having repeatedly tipped his friend Georgios Nikas with inside information supplied by Mr. Lavidas’ father, a director at Ariad Pharmaceuticals, Inc. U.S. v. Lavidas, No. 1:19-cr-00716 (S.D.N.Y. Verdict Jan. 15, 2020).

Mr. Lavidas is the son of a prominent Greek business man who serves as a director of Ariad. The firm, based in Cambridge, Massachusetts, developed and marketed leukemia medication Iclusig. In three instances over a two-year period Mr. Lavidas transmitted inside information about the company to friend Nikas. The first occurred in October 2013. There Mr. Lavidas learned from his father that the FDA was concerned about potential adverse health effects from the leukemia drug. The information was transmitted to Mr. Nikas who had a large position in the stock. The shares were sold and Mr. Nikas established a substantial short position. When the firm released the information about the FDA’s concerns, the share price dropped 62%. Mr. Nikas closed the short position, realizing profits of over $3.2 million. He also avoided a loss of about $800,000.

The second occurred later in the same year. In the last two months of 2013 Mr. Nikas was told by his friend, Telemaque Lavidas, that the pharmaceutical company was making good progress on returning Iclusig to market. The information had been given to Mr. Lavidas by his father. Mr. Nikas established a long position in the stock. When the company announced the drug was returning to market the share price increased. Mr. Nikas had profits of over $1.3 million.

The third happened during the summer of 2015. At that time Ariad learned that an unsolicited takeover offer from another drug firm would be made. Mr. Lavidas obtained the information from his father. He passed it on to Mr. Nikas who purchased shares. When the bid was announced Araid’s stock price rose. Mr. Nikas had profits of over $2 million.

Mr. Nikas received other tips from Mr. Lavidas. In each instance he traded. Overall, he had trading profits of over $15 million.

Mr. Lavidas was found guilty by the jury following a one-week trial. Specifically, the jury returned guilty verdicts on one count of conspiracy to commit wire and securities fraud and three counts of securities fraud. Sentencing is scheduled for April 17, 2020.

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