That’s What Friends are For?  Alleged SEC Violations – Inside Trading Scandal by Former Pfizer Statistician and Friend

The Securities and Exchange Commission (SEC) took legal action against, a former employee of Pfizer Inc., and his close associate accusing them of insider trading. The charges stem from their alleged trading activities prior to Pfizer’s announcement on November 5, 2021, regarding the successful results of its COVID-19 antiviral treatment trial known as Paxlovid. Following the announcement, Pfizer’s stock experienced a significant surge of nearly 11 percent, marking the largest single-day price movement since 2009 and making that inside information coveted and valuable.

According to the SEC’s complaint, Pfizer’s senior statistical program lead for the Paxlovid drug trial had inside information regarding the company’s approval of the the drug to treat COVID in July 2021.. The complaint alleges that the insider had material, nonpublic information regarding the trial’s success preceding the announcement.

Specifically, the insider’s supervisor informed him via chat that the trial’s outcome had been achieved, and a press release was scheduled for the following day. Shortly after this exchange, the insider allegedly purchased short-term out-of-the-money call options for Pfizer, including options that expired the next day that had a high potential upside. He also allegedly shared this confidential information with a friend, who similarly acquired call options in Pfizer. The SEC claims that these trades resulted in illicit profits of approximately $214,395 for the insider and $60,300 for his friend, yielding extraordinary one-day investment returns of 2,458 percent and 791 percent, respectively.

The SEC’s Market Abuse Unit’s Analysis and Detection Center, which employs data analysis tools to identify suspicious trading patterns, initially uncovered this case.

“The SEC’s charges…for insider trading highlight the serious consequences of exploiting confidential information for personal gain. Insider trading undermines market fairness and erodes public trust. Its not just algorithms that should detect inside trading. Whistleblowers are vital in exposing such misconduct, and we stand ready to support those who come forward to report securities violations. Together, we can help uphold market integrity and accountability”- said Jason T. Brown, head of the whistleblower law firm, Brown, LLC

The SEC’s complaint has been filed in the U.S. District Court for the Southern District of New York, accusing the profiteers of violating the antifraud provisions outlined in Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. The SEC seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties. Simultaneously, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against the  traders.