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Last Aug. 17, Jason Chan started his job as a director of biostatistics at a small biotech called Akebia Therapeutics. Just two days later, he began buying Akebia stock based on information he learned about study results for a key drug while attending meetings.

Within days, his wife and a friend to whom he owed money also began buying shares.

The US Department of Justice charged Chan on Tuesday with securities fraud. And the US Securities and Exchange Commission filed a lawsuit against Chan alleging insider trading and wants him to return $68,000 in illegal profits as part of a scheme that netted his wife $115,000 and the friend another $105,000, according to the lawsuit, which was filed Tuesday in federal court in Boston.


The episode was triggered by positive study data for Vadadustat, a drug that the company, which is based in Cambridge, Mass., is developing to treat anemia associated with chronic kidney disease. The pill met its primary endpoint in a mid-stage trial, a development that was discussed in meetings that Chan attended right after joining the biotech. But results were not released until last Sept. 8.

By then, Chan, his wife, and his friend had all engaged in several rounds of stock purchases, even though he was given a copy of the company policy on insider trading his first day of work. The lawsuit, in fact, describes numerous phone calls between Chan and the others that occurred before most transactions. After Akebia officially released the trial results, the stock rose 45 percent, to $11.36 a share from $7.81.


According to an affidavit filed by an FBI agent, Chan admitted that he traded in Akebia shares while being aware of the preliminary trial results, as well as the so-called blackout period when no Akebia employee is allowed to trade company stock. He also admitted that he knew that the preliminary results constituted material information that can have an impact on a company’s stock price.

We asked an attorney for Chan, who is on unpaid administrative leave, for comment and will update you accordingly.

An Akebia spokeswoman wrote us that the “company is not a subject of the investigation and no other Akebia employee is suspected of any wrongdoing. Akebia is committed to compliance and ethics, and we expect our employees to adhere to the highest levels of personal and professional integrity. We are fully cooperating with the government’s investigation. Given the ongoing nature of this matter, we are unable to comment any further.”

As we have noted previously, insider trading has received increasing attention in the pharmaceutical industry in recent years as a number of cases emerged. The issue has raised concerns in connection with clinical trial work, as well as deal-making and the FDA approval process, which some fear can be distorted by such activities.

Earlier this month, a former Oppenheimer & Co investment adviser was arrested on charges of trading on inside information supplied by a childhood friend who worked at Pfizer as director of chemical research and development, and received information about potential deals. The Pfizer employee had to evaluate manufacturing demands and capacity as part of the due diligence. Last month, he pleaded guilty to conspiracy to commit securities fraud, conspiracy to commit wire fraud, and securities fraud.

Last fall, a former Merck financial analyst was sentenced to three years in prison for insider trading after he allegedly misappropriated information about a pair of planned acquisitions and repeatedly tipped off a friend who worked at Bank of New York Mellon. All totaled, about $722,000 in profits were made.

In 2014, former portfolio manager Mathew Martoma, who worked for an affiliate of SAC Capital Advisors, was sentenced nine years in prison. He was accused of using inside information provided by two doctors about results of a trial of an Alzheimer’s drug. Both doctors testified they passed along inside tips on drug tests.

Back in 2012, a former FDA chemist was sentenced to five years in prison for using his access to agency information to make nearly $3.8 million in profits. And three years ago, a former Bristol-Myers Squibb executive was sentenced to a year in prison after admitting to trading on inside information while helping the drug maker evaluate potential targets.

  • If this was material information, why did the company hold it confidential from its calculation on Aug 17 until Sept 8? Management has a legal obligation, if not requirement, to release it sooner.

  • Total communications surveillance by the NSA/CIA/FBI? Total control of any stock markets? Total control of banking accounts? How did they find out?
    Any potential answer hints to a total surveillance state in the USA, or?

    • That’s a good question. Akebia didn’t show the pre-good-news run-up that a lot of stocks have had–so not a lot of public speculation about insider trading. Akebia’s daily trading volume would probably have hidden Chan’s trading volume (it looks like they were in the 1-200k/day range from 8/17 to 9/7, and at $4/share in profit, the wife and friend could have done $220k with ~55,000 shares).

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