(Bloomberg) -- The founder of a California drug maker was charged with fraud for tipping off friends and a family member that his company would be acquired by Teva Pharmaceutical Industries Ltd. in 2015, U.S. prosecutors said.
Sepehr Sarshar, 53, of Encinitas, California, told a college friend, a girlfriend, another long-time friend and a relative about Teva's plans to buy Auspex Pharmaceuticals Inc. for $3.5 billion before the deal was announced, prosecutors said. The information led to $700,000 in illicit trading gains, the government said.
Israel-based Teva, a leader generic drug manufacturing, acquired Auspex to gain treatments for disorders of the central nervous system.
“Sarshar, aware of an impending tender offer for his company, tipped off friends and a close relative, enabling them to reap nearly three-quarters of a million dollars in illegal profits,” Acting U.S. Attorney Audrey Strauss said in a prepared statement Tuesday.
The case was previously investigated by the financial industry's self-regulatory board, FINRA. In that inquiry, Sarshar told the investigators that he didn't recall being in contact with two of the four associates for some time before the deal was announced, though there was evidence they had been in substantial contact, prosecutors said. The U.S. Securities and Exchange Commission was also filing tandem civil charges in the matter on Tuesday.
A spokeswoman for Teva didn't immediately respond to a request for comment. A lawyer for Sarshar in prior litigation didn't immediately respond to a voicemail seeking comment.
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