Matt Levine’s Money Stuff newsletter this week features an insider trading cases that makes you question whether the perpetrators were genuinely clever or just extremely lucky they weren’t caught sooner. Here’s a thought experiment Levine poses:
Let’s say you have cancer. A biotech company is running clinical trials for a promising drug. You join the trial, the drug works, you’re cured. Before the company releases results, you buy call options on their stock. Is this illegal insider trading?
Probably not. Trading on your own experience, “I used a product and I liked it so I bought the stock,” is generally fine. That’s how lots of retail investors operate. But what if you’re a cancer doctor instead? You call the drug company to ask about getting your patient into the study and they share some preliminary data with you. Seems sketchier. You probably signed something promising confidentiality. Now let’s escalate:
What if you don’t actually have a patient? What if you’re not actually a doctor? What if the information you get isn’t market-moving enough, so you just make up fake trial results, steal the identities of actual cancer patients, and post fabricated data on patient forums?
That’s where we arrive at the SEC’s case against the Shoukat brothers. Last week, the SEC charged Muhammad Saad Shoukat, Muhammad Arham Shoukat, and Muhammad Shahwaiz Shoukat with a wild assortment of market manipulation and insider trading schemes. According to the complaint, Saad and Arham impersonated physicians named “Dr. Joseph Garza” and “Dr. Safqat Anwwar” to steal confidential clinical trial information from Olema Pharmaceuticals. They sent fake patient medical records to clinical trial coordinators. When the information they gathered wasn’t market-moving enough, they simply fabricated better results, then stole identities from breast cancer patient forums to post the fake data.
They made about $250,000 on call options.
Looking at the case, that scheme was actually the hard work. The much easier part of their alleged operation involved a friend named Justin Kim, a Lazard associate who tipped them about M&A deals he was working on. That generated about $41 million in profits.
“Get ready bro,” Kim allegedly texted Shoukat in April 2023 after learning Immunogen was in talks with AbbVie. “S**t is about to pop off.”
What did Kim receive for providing tips on ten potential takeovers over several years? A Rolex watch, career advice, and, according to the SEC complaint, “help in drafting slides for a PowerPoint presentation Kim was preparing as part of his job at Lazard.”
PowerPoint decks can be hard but for insider trading the compensation is usually cash, sometimes crypto, occasionally a job or a vacation. Never before have I heard of PowerPoint assistance as a form of illegal kickback. You have to wonder: was it a particularly complicated deck? Did Saad have strong opinions about animation transitions? Was there a tricky chart that needed cleaning up?
Kim now faces both criminal and regulatory charges. The DOJ unveiled fraud and insider trading charges that carry up to 25 years in prison. The SEC is seeking to permanently ban him from the industry.
The Shoukat brothers also pulled off an Opiant Pharmaceuticals scheme where they bought stock based on acquisition tips, then when the deal stalled, allegedly threatened company leadership and issued a fake press release announcing a fictitious partnership deal. There’s a lot of the creative energy here, if it weren’t so obviously criminal. Impersonating doctors, fabricating clinical data, stealing cancer patient identities, threatening executives, issuing fake press releases. And yet the big money, the $41 million, came from the simplest possible scheme: a friend with a good job who texted them when deals were about to happen.
Sometimes insider trading cases involve sophisticated financial engineering or complex offshore structures. This one involved pretending to be a doctor named “Dr. Safqat Anwwar” and asking for help with PowerPoint slides.