U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19625 / March 28, 2006
SEC v. Alexander J. Yaroshinsky, Civil Action No.
06CV2401 (S.D.N.Y., filed March 28, 2006)
SEC Charges California Drug Executive with Insider Trading After
Learning of the FDA's Reaction to Cancer Tests of Company's Acne
Drug
Court freezes assets of drug executive at Connetics Corp. who
orchestrated intricate stock-selling scheme before price fell 27%
On March 28, the Securities and Exchange Commission filed suit in
the United States District Court for the Southern District of New
York against Alexander J. Yaroshinsky, a Vice President at Palo
Alto, California-based Connetics Corp., charging him with illegally
trading on the basis of non-public, inside information after
learning the FDA's preliminary reactions to a study relating to
cancer tests of its acne drug. At the Commission's request, the
Honorable Michael B. Mukasey issued an order freezing Yaroshinsky's
assets, temporarily restraining him from further violations, and
granting other emergency relief.
The Commission's complaint alleges that Yaroshinsky, who
participated in tests which led the FDA to ultimately conclude that
the drug was "unsafe for use," learned the FDA's preliminary views
with respect to the cancer tests in an April 13, 2005 call with the
FDA. Shortly thereafter, Yaroshinsky positioned himself to profit
from a fall in the price of Connetics' stock. In accounts he
controlled, Yaroshinsky sold 15,100 previously acquired Connetics
shares, and bought 2,076 put contracts which gave him the right to
sell Connetics shares at a fixed price and profit when the shares
fell below that price. Ultimately, on June 13, 2005, when news of
the non-approval was made public, Connetics' share price fell 27%
and Yaroshinsky reaped a benefit of at least $680,000.
The complaint charges Yaroshinsky with violations of the
anti-fraud provisions of the Securities Exchange Act of 1934,
specifically Section 10(b) and rule 10-b5 thereunder, and seeks a
permanent injunction, disgorgement of all ill-gotten gains plus
prejudgment interest, and civil money penalties.
The Commission would like to acknowledge the assistance of
Chicago Board Options Exchange.
http://www.sec.gov/litigation/litreleases/lr19625.htm
