Swiss Trader Set to Be Star Witness at U.S. Insider Trial
Secretive Swiss Trader to Be Star Witness at U.S. Insider Trial
(Bloomberg) -- A mysterious Swiss trader tied to an international insider-trading network is in U.S. custody and preparing to testify in the New York criminal trial of an alleged member of the operation.
Marc Demane-Debih, a Geneva-based trader arrested in Serbia last year, pleaded guilty to 38 criminal counts and agreed to cooperate with prosecutors in a closed-door proceeding in October, according to an FBI affidavit disclosed in a court filing. He’s also expected to testify in the upcoming federal trial in Manhattan of Telemaque Lavidas, the son of a wealthy Greek pharmaceutical executive, the judge overseeing the case said at a hearing Thursday.
Lavidas, whose trial is scheduled to begin Jan. 6, is accused of getting inside tips about Ariad Pharmaceuticals Inc. from his father, Athanase Lavidas, a former Ariad board member and the chief executive of Lavipharm SA, and passing them along to a friend. The friend, Georgios Nikas, is a Greek businessman who owns restaurants in New York, according to prosecutors.
The U.S. claims Telemaque Lavidas passed the tips to Nikas in exchange for a $500,000 investment from Nikas’s wife in his fruit-bar company, Mediterra Inc. The government alleges it has identified more than 50 deals in which people in the network engaged in “suspicious trading,” for a total of more than $100 million in illicit profits.
Bloomberg News was first to report that the unidentified Swiss trader in the indictments may have been Demane-Debih and that he was probably cooperating with authorities.
Demane-Debih was arrested in Serbia on a U.S. warrant for alleged securities fraud and extradited to New York in May, a spokeswoman for a Belgrade court said. He’s in custody in New York, according to a court filing, though he doesn’t show up on the Bureau of Prisons inmate locator. And until recently, in the Lavidas case, his name hasn’t been included in any court papers. Attempts to locate a lawyer for Demane-Debih were unsuccessful.
Nikas, who was also charged, is in Greece and is considered a fugitive by U.S. authorities. Telemaque Lavidas is being held in jail while awaiting his trial. He has pleaded not guilty. Athanase Lavidas isn’t charged.
Since 2013, the U.S., working with other authorities, has investigated an alleged series of insider-trading rings including residents of the U.S., U.K., France, Switzerland, Israel, Cyprus, Greece and Hong Kong, according to prosecutors. The participants allegedly used secret information to profit from mergers, regulatory moves and other market-moving actions involving pharmaceutical companies.
In addition to Ariad, companies whose stocks were targeted include Life Technologies Corp., Onyx Pharmaceuticals Inc., Cadence Pharmaceuticals Inc. and Questcor Pharmaceuticals Inc., according to the government. Telemaque Lavidas is charged only in connection with passing tips on Ariad.
The investigation became public in October, when prosecutors in New York announced charges against six people, including Lavidas and Nikas. Also charged was Bryan Cohen, a Goldman Sachs Group Inc. investment banker. The defendants face multiple counts of conspiracy, wire fraud and securities fraud, the most serious of which carry a maximum 25-year prison term. Cohen has pleaded not guilty. His trial is scheduled for Feb. 4.
Read More: Centerview, Moelis Swept Up in Global Insider-Trading Probe
The charges against Demane-Debih include securities fraud, wire fraud, tender offer fraud and conspiracy. He is cooperating in hopes of leniency when he’s sentenced.
Prosecutors claim that, from 2013 to 2015, Lavidas passed information on Ariad to Nikas, who in turn tipped off Demane-Debih and at least 16 other people. Among them, prosecutors claim, was Steve Makris, a food industry executive who owns Thalassa, a Greek restaurant in Manhattan’s upscale Tribeca neighborhood. Thalassa is a favorite of neighborhood celebrities, including actor Robert DeNiro.
Makris didn’t respond to emails and phone messages seeking comment.
Trading in Ariad was based around four stock-moving events, according to the government. In June 2013, Lavidas allegedly told Nikas that the Ariad board had learned that one of its drugs, Inclusig, was going to be approved by the European Commission. Nikas bought thousands of shares and profited when the news was made public, sending Ariad shares up 12%. Three weeks later, Makris told Nikas in an email exchange quoted by prosecutors “I’m in Athens only for tonight. Maybe your around?”
“Was trying to find u 3 weeks ago when I had some seriously juicy info for u but nowhere to be found...” Nikas responded.
Later in the exchange, Makris said “Tell me the juice.”
“Stock market related,” Nikas responded. “U snooze u lose.”
In September and early October 2013, Lavidas told Nikas that the U.S. Food and Drug Administration had concerns about Inclusig’s safety. Nikas passed the information to Demane-Debih and others, who reversed their positions from long to short on Ariad, according to the government. The stock fell 67% when the FDA’s concerns were reported.
Then, in November or December 2013, the U.S. alleges, Lavidas gave Nikas a heads-up on an FDA decision to let Inclusig back on the market, which touched off a 16% increase. And in July 2015, Nikas traded ahead of news of a potential acquisition of Ariad that sent its stock up 41%, prosecutors said in court papers.
In addition to the charges connected to Lavidas and Ariad, Nikas is charged with participating in a broader conspiracy to collect inside information on corporate acquisitions from investment bankers, according to prosecutors. Bankers charged by the U.S. include Goldman Sachs’s Cohen, Benjamin Taylor, who previously worked at Moelis & Co., and Darina Windsor, who had worked at Centerview Partners LLC in London. Taylor and Windsor are charged with passing inside information on 22 companies. They are not in U.S. custody.
Jonathan Streeter, a lawyer for Lavidas, said in the hearing Thursday that one of his client’s defenses will be that the source of the Ariad information was Windsor, not his client.
The case is U.S. v. Lavidas, 19-cr-716, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Blumberg, Anthony Lin
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