Global Insider-Trading Ring Linked to Trial of Pharma CEO’s Son

(Bloomberg) -- The criminal trial of a New York man may help explain how tens of millions of dollars in illicit profits were allegedly generated by a global insider-trading network that included a Greek pharmaceutical executive, a Goldman Sachs Group Inc. banker, a Monaco poker player, a Swiss trader and a Manhattan restaurant owner.

Telemaque Lavidas is the first of the accused to go before a jury in the U.S., where prosecutors say he was one of the people feeding information into a network of traders on several continents. His trial starts Monday in federal court.

In a scheme that stretched for years and included dozens of trades, participants cultivated ties to bankers, made bets based on information gleaned from them and shared leaks in face-to-face meetings or over encrypted social media apps such as Signal or WhatsApp, the government claims. The network was based on location and affinity, with some of the European traders saying they hung out together in clubs and in posh locales.

“The investigation to date has identified over 50 deals where the subject traders have engaged in suspicious trading, as a result of which the participants in the scheme have collectively made over $100 million in profits,” an FBI agent said in a 2017 affidavit made public last month.

Lavidas allegedly played a small role in the wider plot. He is accused of providing non-public, market-moving tips about Ariad Pharmaceuticals Inc. that he got from his father, Athanase Lavidas, a former Ariad board member and the chief executive officer of the family-owned Lavipharm SA. The younger Lavidas passed the tips to Georgios Nikas, a Greek businessman who owns restaurants in New York and used the information to make trades before big share moves, prosecutors said.

In exchange, the U.S. claims Lavidas got a $500,000 investment from Nikas’s wife in his fruit-bar company, Mediterra Inc.

Read More: Mystery Swiss Trader May Link Insider Groups

Lavidas was among six people charged in October, when the U.S. announced a series of cases alleging insider trading by a loosely organized network of bankers, traders and entrepreneurs. Links also emerged between suspects in probes in the U.K. and France.

A key witness in Lavidas’s trial is expected to be Marc Demane-Debih, a Geneva-based trader arrested in Serbia last year. He pleaded guilty to 38 counts in a secret hearing in October. Demane-Debih agreed to cooperate with prosecutors in hopes of leniency when he’s sentenced.

Demane-Debih claims that Nikas told him at a 2011 dinner party that he had inside information about Ariad that he got from Lavidas and his father, the government said. Nikas has also been charged, but he remains in Greece and is considered a fugitive.

Lavidas’s lawyer, Jonathan Streeter, didn’t respond to an email seeking comment on the trial.

At a hearing in December, Streeter told U.S. District Judge Denise Cote that one defense will be that the Ariad tips that Nikas allegedly used to make his trades didn’t come from Lavidas, but from Darina Windsor, a former Centerview Partners LLC investment banker in London who is charged but not in U.S. custody.

Link to Others

While Lavidas is charged only with giving tips to Nikas about Ariad, prosecutors claim Demane-Debih provided Nikas with inside information about many companies. That suggests the Swiss banker may be a link to others accused of being in the ring.

FBI Special Agent Shannon Bieniek said in the 2017 affidavit that the government has been investigating an insider-trading network that involved residents of the U.S., U.K., France, Switzerland, Israel, Cyprus, Greece and Hong Kong since 2013. Shares of pharmaceutical companies were bought and sold before important news releases were issued, Bieniek said. Some media reports were “manufactured by the participants in the scheme,” she said.

In addition to Lavidas, Nikas and Windsor, U.S. authorities have charged Goldman Sachs investment banker Bryan Cohen with passing confidential information. Cohen, who’s free on bail and on leave from the bank, is scheduled to go on trial in Manhattan Feb. 4. He denies wrongdoing.

Poker Player

The U.S. also charged Joseph El-Khouri, a securities trader and avid poker player who lives in London and Monaco. He’s free on bail in London while fighting extradition to the U.S. Another defendant is Benjamin Taylor, a former Moelis & Co. investment banker who lived with Windsor in London.

Lavidas, a U.S. citizen, has been in jail since his arrest. Cote considered him a flight risk and rejected an elaborate $26 million bail package.

Trading in Ariad was based around four stock-moving events, which helped generate the illicit profit for Nikas, according to the government.

In June 2013, Lavidas allegedly told Nikas that the Ariad board had learned that one of its drugs, Iclusig, was going to be approved by the European Commission. Nikas bought thousands of shares and profited when the news was made public and Ariad shares surged 12%.

In September and early October 2013, Lavidas told Nikas that the U.S. Food and Drug Administration had concerns about Iclusig’s safety, according to the government. The stock fell 67% when the FDA’s concerns were reported.

Then, in November or December 2013, Lavidas gave Nikas a heads-up on an FDA decision to let Iclusig back on the market, which touched off a 16% increase, the U.S. claims. In July 2015, Nikas traded before public reports of a potential acquisition of Ariad that sent its stock up 41%, prosecutors said.

The case is U.S. v. Lavidas, 19-cr-716, U.S. District Court, Southern District of New York (Manhattan).

©2020 Bloomberg L.P.

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