August 25, 2020

DOJ, SEC charge former pharmaceutical company CEO with insider trading

On August 25, 2020, Sepehr Sarshar, founder and former chief executive officer of Auspex Pharmaceuticals, Inc., was charged in US District Court for the Southern District of New York with one count of wire fraud and one count of fraud in connection with a tender offer, in violation of 15 USC §§ 78n(e) and 78ff; 17 CFR §§ 240.14e-3(a) and 3(d), and; 18 USC §§ 1343, 1348 and 2.  

The complaint alleges that Sarshar, by virtue of his position on Auspex’ board of directors, acquired material nonpublic information concerning the anticipated acquisition of the company by a global pharmaceutical concern.  He is alleged to have conveyed the material nonpublic information to several friends and family members, who used the material nonpublic information to trade in the shares of Auspex in advance of the March 2015 public announcement of the global concern’s tender offer, generating approximately $700,000 in profits.  According to the complaint, Sarshar also lied to the Financial Industry Regulatory Authority during its investigation of insider trading in Auspex securities.

In a parallel action by the US Securities and Exchange Commission, Sarshar was charged with insider trading pursuant to 15 USC § 78n(e) and Rule 14e-3 thereunder.  The SEC seeks a permanent injunction and the payment of a civil penalty in its action against Sarshar.

DOJ press release | SEC press release | DOJ complaint | SEC complaint