SEC Charges Former Biotech Executive With “Shadow Trading”

SEC Charges Former Biotech Executive With “Shadow Trading”

Share on facebook
Share on twitter
Share on linkedin
Share on email
Share on print

On August 17, 2021, the U.S. Securities and Exchange Commission (“SEC”) charged the former head of business development at Medivation, Inc. with insider trading. The employee, Matthew Panuwat, purchased stock options of Incyte Corporation, a competitor to Medivation, a few days before the public announcement that Pfizer Inc. would acquire Medivation. According to the SEC’s complaint, Panuwat received confidential information during his employment at Medivation related to the upcoming acquisition, including information that Incyte had been cited as a comparable company. The SEC alleges that Panuwat then exploited that confidential information by purchasing stock options in Incyte in anticipation that the announcement of the acquisition would cause an increase in the stock price. The day the acquisition was announced, Incyte’s stock price increased by about 8% and Panuwat sold the options resulting in an illicit profit of $107,066.

Insider trading cases are typically centered on the trading of securities in the company in which the information obtained. What makes this insider trader case distinct is that Panuwat did not trade in the securities of either of the companies involved in the acquisition, but instead engaged in “shadow trading.” Shadow trading involves trading securities of one company while in possession of material non-public information of another closely correlated or economically linked company.

In light of this recently filed complaint, Greyline encourages our clients to consider the following:

  • Review current insider trading policies and procedures to determine if risks are properly identified and mitigated based on your firm’s business and investment strategies.
  • Enhance employee training by adding additional guidance around material non-public information and restrictions on trading in securities other than those contained in the information.
  • Assess the likelihood that information of a comparable company could be received when signing NDAs, accessing data rooms, or when permitting employees to serve as directors of both public and private companies.
  • Conduct focused employee trade reviews to identify unusual trading in the securities of economically linked securities.
  • Address the risks associated with obtaining material non-public information from portfolio companies. Consider restricting employee trading in comparable companies in which material non-public information has been received when evaluating potential transactions.

These allegations indicate the SEC continues to take an aggressive approach to insider trading.  As such, Greyline suggests reviewing the full litigation release, as well as firm policies and procedures, and reaching out to your Greyline representatives to discuss your questions and concerns.

The full litigation release can be viewed at

Related Posts

Darren Mooney

Partner and Co-Head of Business Development

Darren Mooney is a Partner and the Co-Head of Business Development at Greyline. Before joining Greyline, Darren served as deputy chief compliance officer of Partner Fund Management where he held primary responsibility for the compliance program of the second-largest hedge fund in the Bay Area. Prior to that, Darren spent five years providing compliance consulting services at Cordium and then ACA Compliance Group, where he led the company’s San Francisco office and west coast operations. In addition to providing ongoing consulting services to a variety of investment managers, including hedge fund, private equity, venture capital, real estate, quantitative and other wealth managers, Darren also regularly guided clients through the SEC registration process, implemented tailored compliance programs, supported clients’ live SEC exams, and served as an SEC-mandated independent compliance consultant following an SEC enforcement action. Darren’s other experience includes serving as deputy chief compliance officer and associate counsel at F-Squared Investments where he directly supported the compliance program during the investigation and subsequent enforcement regarding historical advertising practices. Darren has a B.S. in Economics from the University of Delaware and a J.D. from Suffolk University Law School. He is a member of the Massachusetts bar.

Annie Kong

Partner and Head of Venture Capital
Annie Kong is a Partner and Head of the Venture Capital Division at Greyline. She provides ongoing compliance consulting to investment advisers and manages client relationships. Prior to joining Greyline, Annie was part of compliance and operations at a long-only manager-of-managers that advised pension fund clients. While there, she conducted compliance and operational due diligence on SEC-registered investment advisers on the platform. She also oversaw and counseled on various legal matters across the firm. Annie has a B.A. in Economics from the University of California, San Diego, and a J.D. from the University of San Diego School of Law. She is an active member of the State Bar of California.
Greyline is pleased to announce that we are the recipient of the 2021 HFM U.S. Service Award in the Best Technology Firm – Newcomer category.