Six people, including a former employee of investment bank Citigroup’s San Francisco office, have been charged in an $41 million insider trading and stock manipulation scheme that involves two biotech companies.
The case alleges that the individuals created and disseminated fake data and press releases to artificially boost the share prices of Olema Oncology and Opiant Pharmaceuticals, according to a Dec. 19 release from the U.S. Attorney's Office in New Jersey. The defendants then sold their shares to allegedly profit off the fabricated price increases.
Three of the defendants, brothers Saad Shoukat, Arham Shoukat and Shahwaiz Shoukat, are being represented by Chris Christie, the former Republican governor of New Jersey.
The ex-Citi employee, Gyunho “Justin” Kim, was charged separately and made an initial court appearance on Dec. 12, according to the announcement.
“Mr. Kim is no longer with Citi, and we understand that the conduct charged in the complaint pertains to activity at a prior employer of Mr. Kim and not Citi,” a Citi spokesperson told Fierce in a statement.
The newly unsealed filing (PDF) alleges that the defendants engaged in three overlapping securities fraud schemes from June 2020 to February 2024.
The first involved insider trading, where Kim purportedly passed non-public knowledge regarding at least nine healthcare and biopharma deals he gained from his employment at an investment bank to Saad Shoukat, who then traded on the information and passed it along in turn to the other defendants, according to the legal documents.
In total, the alleged scheme was said to bring in $41 million in illegally-obtained funds, according to the U.S. Attorney's Office.
In the second purported scheme, Saad and Arham Shoukat began investing in Olema stock in the spring of 2021. Olema is an oncology outfit specializing in breast cancer, and the brothers were reportedly interested in the biotech’s lead asset palazestrant (OP-1250), an estrogen receptor antagonist. Kim is not involved in the charges related to Olema.
The Shoukat brothers used hacking techniques and social engineering to learn that “OP-1250 was less effective than they had hoped,” according to the charges.
Saad, Arham and others then allegedly created a fake image of the company’s upcoming poster at the 2021 San Antonio Breast Cancer Symposium, featuring fabricated phase 1 data for OP-1250, and circulated it on social media in order to boost the stock price, according to the filing and a November 2021 release from Olema. They then sold their shares, the filing says, costing other investors more than $1 million.
In the 2021 release, Olema stated that the poster image was falsified and “not released or authorized by the company.”
The third alleged scheme involved Opiant, which was developing an opioid overdose treatment. In this case, Kim is claimed to have told Saad that another company was maneuvering to acquire Opiant. This led Saad and other defendants to purchase Opiant stock.
When that deal stalled, the Shoukat brothers and others allegedly crafted a fake Opiant website—complete with fake email addresses—and put out an April 2022 press release falsely claiming that Opiant had signed a deal with Hikma Pharmaceuticals worth as much as $225 million.
This prompted a 29% boost in Opiant’s stock, during which the defendants sold their shares at a profit, costing investors a further $1 million, according to the legal documents.
The other defendants named in the case are Daniyal Khan and Izunna Okonkwo. Okonkwo, a dual citizen of the U.S. and Nigeria, was named to the Forbes 30 Under 30 list in 2023 for cofounding a software startup called Pastel.
When reached by Fierce, Okonkwo's lawyer declined to comment on the charges. At the time of publication, attorneys representing the other defendants had not replied to requests for comment from Fierce.
The U.S. Attorney's Office is alleging that 12 different laws were broken across the six defendants, with a collective 51 charges amongst the group. The charges include insider trading, securities fraud, wire fraud and conspiracy to commit market manipulation, among others. For several of the charges, the maximum sentence is 25 years in prison.
Olema and Opiant, the latter of which was acquired by Indivior in November 2022, are not charged with any wrongdoing.
Olema completed a “robust internal investigation” and determined that no one at the company had participated in the alleged scheme, a spokesperson told Fierce Biotech.
“We have worked with government agencies as they conducted their investigations into market manipulation,” the spokesperson added. “We fully support the Office’s pursuit of schemes that threaten the fairness and transparency of markets and harm investors.”
At the time of publication, Indivior has not responded to a request for comment from Fierce.