Sepehr Sarshar – Insider Trader Busted by The SEC (2023 Updated)
On May 5, 2022, the U.S. District Court for the Southern District of New York entered a final consent judgment against Sepehr Sarshar, a founder and former board member of Auspex Pharmaceuticals, Inc., who was charged with insider trading ahead of a tender offer.
Sepehr Sarshar (Auspex Pharmaceuticals Inc) was charged with insider trading.
The Securities and Exchange Commission (SEC) has just recently caught former CEO Sepehr Sarshar, who worked for a prominent healthcare company, engaging in illegal insider trading. This case exemplifies the determination of the SEC to clamp down on illicit insider trading and serves as a cautionary tale for other persons who may be contemplating engaging in illegal trading practices.
The Context of the Investigation
A former executive of a healthcare organization that was in the process of acquiring another healthcare organization, Sepehr Sarshar was involved in the process. During this time, Sepehr Sarshar was able to get sensitive information about the possible acquisition, which he then utilized in order to trade securities in the target firm.
During the course of several months, during which time Sepehr Sarshar engaged in illegal insider trading and gained considerable profits by trading securities based on proprietary knowledge, the behavior persisted, and Sepehr Sarshar made significant profits. On the other hand, the SEC finally became aware of his behavior and opened an investigation into it.
The Investigation Conducted By The SEC
During the course of their inquiry, the SEC discovered evidence of insider trading behavior on the part of Sepehr Sarshar. This evidence included emails and text messages that proved his awareness of the sensitive information. The SEC also discovered that Sepehr Sarshar had informed his brother and a friend about the potential acquisition, allowing them to also profit from the insider information. This was another way that Sarshar was able to profit from his position as an insider.
The Apprehension and Its Repercussions
As a direct consequence of the investigation conducted by the SEC, Sarshar was taken into custody and charged with engaging in illegal insider trading. Since then, he has entered a guilty plea to the allegations, and as a result, the court has ordered him to pay nearly $1.8 million in restitution and penalties.
In addition to this, Sepehr Sarshar is prohibited from ever again holding an officer or director position at a public business or taking part in the sale of penny stock under any circumstances whatsoever.
On August 25, 2020, the Commission filed a complaint alleging that Sarshar communicated material nonpublic information to his friends and family and/or caused them to trade prior to the March 2015 public announcement that Teva Pharmaceutical Industries Ltd. had commenced a tender offer to acquire Auspex. The complaint alleges that in February and March of 2015, Sarshar learned through his position on Auspex’s board of directors that Teva and other pharmaceutical companies were interested in acquiring Auspex and that Auspex’s board and management were taking active steps to facilitate a sale of the company.
According to the complaint, Sarshar communicated material nonpublic information regarding the highly confidential tender offer process to numerous friends and family and caused them to trade in Auspex stock ahead of the tender offer announcement, at the expense of other Auspex shareholders.
The final consent judgment against Sarshar permanently enjoins him from violating Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3 thereunder and orders him to pay a civil penalty in the amount of $56,222.
The SEC’s investigation was conducted by Megan Ryan and supervised by Julia C. Green and Scott A. Thompson, of the SEC’s Philadelphia Regional Office. Mark R. Sylvester and Jennifer C. Barry led the SEC’s litigation. The SEC appreciates the assistance of the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.
Catch reports on investments, finance advisers, CEOs, and scams in our latest news section.