Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation ("FBI"), announced today that ZACHARY ZWERKO was arrested on securities fraud charges stemming from his involvement in an insider trading scheme. Specifically, ZWERKO passed material nonpublic information about potential merger and acquisition activity related to certain pharmaceutical companies to a co-conspirator, who then traded on the information, resulting in profits of approximately $722,000. ZWERKO was arrested on Friday, October 10, 2014, in Cambridge, Massachusetts, and is expected to be presented today in Boston federal court before a United States Magistrate Judge.
Manhattan U.S. Attorney Preet Bharara said: "Today we announce charges against yet another individual for alleged insider trading. As alleged, Zachary Zwerko was a spy in the camp of his own company who passed secret merger and acquisition information to his co-conspirator so that lucrative illegal trades could be made. Those with access to inside information who contemplate releasing it for financial profit should understand that this Office and our law enforcement partners will track them down and prosecute them."
FBI Assistant Director-in-Charge George Venizelos said: "Zwerko is charged, like so many others, with insider trading. This is a crime that undermines the public's faith in our financial markets and puts companies at risk. The FBI remains committed to curbing corruption to better ensure fairness in the marketplace."
According to the allegations contained in the Complaint unsealed in Manhattan federal court:
From at least 2012 through the present, ZWERKO was engaged in an insider trading scheme related to the acquisitions of certain pharmaceutical companies. ZWERKO, a Senior Finance Analyst in the Financial Evaluation and Analysis Group of a pharmaceutical company that operates in New Jersey (the "Pharma Company"), performed work in connection with numerous potential and actual corporate transactions, including acquisitions. As a Financial Evaluation and Analysis Group employee, ZWERKO had access to a computer directory maintained by the Pharma Company that contained material, nonpublic information related to the Pharma Company's potential acquisitions.
On multiple occasions, ZWERKO passed to another person ("CC-1") material, nonpublic information related to future acquisitions by the Pharma Company, including the identities of companies that were in negotiations with the Pharma Company for potential acquisitions (the "Target Companies"). CC-1 then traded in the securities of the Target Companies. The Target Companies were later acquired, in one instance by the Pharma Company, and the prices of the shares of the Target Companies increased after the acquisitions were announced publicly. CC-1 then sold CC-1's positions in the shares of the Target Companies, thereby profiting from the movement in stock price. From this illegal trading, CC-1 earned profits of at least approximately $722,000.
* * *
ZWERKO, 32, is charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
The U.S. Securities and Exchange Commission ("SEC") announced civil charges against ZWERKO in a separate action.
Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the SEC for its assistance. He added that the investigation is continuing.
Today's announcement is part of efforts underway by President Obama's Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys' offices and state and local partners, it's the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jessica Masella and Edward Kim are in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.