On July 26, 2023, the Securities and Exchange Commission announced that it charged Joseph Lewis, a British businessman and billionaire investor, with insider trading along with his former girlfriend Carolyn Carter, and his two private pilots, Patrick O’Connor and Bryan Marty Waugh. Lewis is the principal owner of Tavistock Group, an international private investment organization that has investments in over 200 operating companies, and the majority owner of a biotechnology investment fund that, according to the SEC, provided him with access to material nonpublic information (“MNPI”) regarding the fund’s portfolio companies. The SEC alleges that, in 2019, Lewis shared MNPI with Carter, O’Connor and Waugh to enable them to execute unlawful trades.
According to the SEC’s complaint, in July 2019, Lewis learned that an unnamed company in which his biotech fund was invested was raising capital using a Private Investment in Public Equity (“PIPE”), a type of transaction that frequently results in increased share prices. Within three hours of learning this confidential information, Lewis shared the information with Carter in breach of his duty of trust and confidence to the fund, and Carter allegedly bought more than $700,000 worth of this company’s common stock based on the tip. When the PIPE was revealed to the public, the company’s common stock increased by approximately 34.4 percent and generated profits of more than $172,000 for Carter. The complaint further alleges that, in September 2019, Lewis obtained MNPI about another portfolio company that had received positive results in a clinical trial. Before the results were announced, Lewis shared the MNPI with Carter, O’Connor and Waugh. Lewis allegedly gifted the tip to O’Connor and Waugh and loaned each of them $500,000 to execute the trades as a substitute for a formal retirement plan. When the company publicized the results of the clinical trial in October 2019, its share price increased by 16.7 percent and Carter, O’Connor and Waugh collectively profited more than $373,000.
The complaint, which was filed by the SEC in the US District Court for the Southern District of New York, charges Lewis, Carter, O’Connor, and Waugh with violating Section 10 (b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. O’Connor’s wife Jean was also named as a relief defendant because some of O’Connor’s trades were allegedly placed from a brokerage account in her name. The SEC is requesting that the court permanently enjoin the defendants from engaging in further securities violations and is seeking civil penalties against them. The SEC is also requesting that the court order Carter, O’Connor, and Waugh to pay disgorgement and prejudgment interest for their ill-gotten gains.
On the same day, the US Attorney’s Office (“USAO”) for the Southern District of New York announced parallel criminal charges against Lewis, O’Connor and Waugh for their roles in the insider trading scheme, which include securities fraud and conspiracy. The USAO additionally accused Lewis of falsely reporting his percentage of ownership shares in Mirati Therapeutics, a Canadian pharmaceutical company, and hiding his undisclosed ownership shares through shell corporations and other entities. According to the USAO, the false reporting enabled Lewis to exercise certain warrants in the company and realize vast financial gains. Lewis also allegedly condoned the actions of one of his employees who made false statements to HSBC Bank when it attempted to conduct diligence on a transaction related to Mirati.
SEC Press Release | SEC Complaint | USAO SDNY Press Release | Unsealed Indictment (Lewis only) | Unsealded Indictment (Lewis et al.)