On May 24, 2022, the US Securities and Exchange Commission charged Frank Glassner with insider trading for purchasing securities of Kadmon Holdings Inc., a biopharmaceutical company that was also his client, in advance of a 2021 announcement regarding the company’s planned acquisition by global biopharmaceutical company Sanofi SA.
According to the SEC’s complaint, Glassner, a California-based executive compensation consultant, learned of the potential acquisition when a Kadmon executive contacted him in late July 2021 to request that he perform an acquisition-related compensation analysis on an expedited basis. Despite the executive’s warning to Glassner that the planned acquisition was “important and confidential” and his signature upon a confidentiality agreement that prohibited the unauthorized use of Kadmon’s confidential information, Glassner allegedly reactivated his previously dormant online brokerage account within a half hour of his call with Kadmon and began placing orders to purchase Kadmon stock on the very next trading day – orders that were placed based on material nonpublic information (MPNI) and while in possession of MPNI from Kadmon. The SEC also alleges in the complaint that Glassner made multiple purchases of Kadmon stock and call options until August 23, 2021 during which time he continued to receive additional MNPI regarding the acquisition negotiations including the acquisition price. Following the announcement of the planned acquisition on September 8, 2021, Kadmon’s stock price increased by nearly 71 percent enabling Glassner to generate approximately $405,000 in illicit profits.
According to the SEC’s complaint, Glassner is charged with violating the antifraud provision of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is also seeking a permanent injunction, a civil penalty and disgorgement with prejudgment interest.
On the same day, the US Attorney’s Office for the Southern District of New York announced that parallel criminal charges had been filed against Glassner, after its unsealed complaint revealed two counts of securities fraud had been filed in connection with the insider trading scheme.