Nonpublic information about Abbott's ($ABT) May agreement to buy CFR Pharmaceuticals helped score a former CFR board member a hefty profit, according to U.S. regulators. And they're charging him with insider trading.
On Monday, the SEC filed a civil lawsuit accusing former director Juan Cruz Bilbao Hormaeche of racking up more than $10.1 million through trades on private information he learned during board meetings that preceded the deal, Reuters reports. The lawsuit also charges a business associate of Bilbao's who allegedly processed transactions for Bilbao and himself, earning $500,000 in the process.
According to regulators, after learning of Abbott's offer in mid-March, Bilbao used his associate to buy up more than 700,000 American depository shares of CFR totaling $14.35 million in the name of a Virgin Islands entity, with the associate buying $700,000 worth of CFR shares of his own. After Abbott announced the acquisition and CFR's stock price rose, they tendered those shares to make a profit.
This isn't the first deal in a banner M&A year for pharma to produce insider trading charges. Back in October, for one, the SEC and federal prosecutors filed a civil and criminal complaint against a former Merck ($MRK) employee who they said used info from confidential files to have a friend make trades on future buyout target Idenix.
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