U.S. investigators filed criminal and civil fraud charges against a French doctor they say leaked negative inside information about a Human Genome Sciences Inc. hepatitis drug trial, enabling six hedge funds to avoid $30 million of losses.
Yves Benhamou was accused by the Department of Justice and Securities and Exchange Commission of tipping a portfolio manager about Human Genome’s experimental hepatitis C treatment Albuferon in late 2007 and early 2008.
Authorities say he leaked information he learned while sitting on a steering committee overseeing the drug’s clinical trial.
Investigators said Benhamou learned about developments in the trial, including one fatality and the occurrence of lung disease in one patient, and leaked this information to the portfolio manager.
The SEC said this manager, acting on behalf of the hedge funds’ investment advisers, caused the funds to sell their entire 6.16 million-share stake in Human Genome before the news about the drug was made public Jan. 23, 2008. Human Genome shares fell 44 percent that day, investigators said.
Prosecutors said Benhamou, of Neuilly-sur-Seine in France, had been scheduled to appear Tuesday morning in the U.S. District Court in Boston. A U.S. lawyer for the defendant did not immediately return a call seeking comment.
Prosecutors charged Benhamou with one count of securities fraud, punishable by up to 20 years in prison, and one count of conspiracy, which could carry a five-year term.
The SEC alleged violations of U.S. insider trading laws, and is seeking civil penalties, restitution and other damages.
Both lawsuits were filed in U.S. District Court in Manhattan.
“By profiting from his sensitive position and providing the hedge fund (group) an unfair advantage, Benhamou undermined the integrity of the securities market and sold out his employer,” Preet Bharara, the U.S. attorney for the Southern District of New York, said in a statement.
Neither complaint identifies by name the hedge funds or their investment advisers.
Human Genome did not immediately return a request for comment. Its shares were down 4 cents at $26.56 in afternoon trading on the Nasdaq.
The criminal case is U.S. vs. Benhamou, U.S. District Court, Southern District of New York, No. 10-mag-02424. The civil case is SEC vs. Benhamou in the same court, No. 10-08266.
