Prosecutors allege that a Connecticut heart doctor not only used insider info to sell shares in a biotech while leading a trial for its leading drug, but then shorted the shares when the news got worse.
Edward Kosinski, 68, was indicted Thursday on two counts of securities fraud for trades he made in 2014 in shares of Regado Biosciences while he was lead investigator for a drug being developed by Regado to better regulate clotting in patients undergoing the heart procedure angioplasty. The cardiologist pleaded not guilty and was released on $500,000 bond, the Justice Department reported. The SEC also filed a civil complaint against Kosinski.
The DOJ said Kosinski sold 40,000 shares he held in Regado at prices between $6.59 and $7 a share after clinical trial investigators were told that there had been several allergic reactions during the study. That saved the doctor from a $160,000 loss when the news was released a few days later and Regado’s stock fell by $3.95 a share.
But authorities allege Kosinski was not satisfied with simply dodging a bullet with his insider info. They contend that a month later, he acted again when investigators were told “that a death occurred in the clinical trial and that the trial was on hold.” They say Kosinski shorted Regado shares and made $3,000 when the stock price fell again on the news.
Regado was taken over last year by Tobira Therapeutics ($TBRA) in a reverse merger.
The indictment comes a couple of months after a former Pfizer ($PFE) employee was indicted along with a friend to whom he allegedly leaked company secrets. In that case, Michael Maciocio is accused of using info he garnered from his position as a supply chain exec for Pfizer to figure out potential deals. He passed the info along to his lifelong friend David Hobson, who at the time was an Oppenheimer & Co. investment adviser. Hobson then made trades using the insider info, authorities contend.