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A former accountant for Celator Pharmaceuticals Inc. shared with three other men some inside “juice” about the New Jersey company’s $1.5 billion acquisition before it happened, U.S. authorities said Aug. 31 ( SEC v. Kita, D.N.J., 3:17-cv-06602, 8/31/17 ).
Evan Kita of Yardley, Pa., pleaded guilty to federal securities fraud and conspiracy charges in connection with illicit trading on Celator’s 2016 purchase by Jazz Pharmaceuticals PLC and its positive clinical trials for a cancer drug, the Department of Justice said. He allegedly tipped two friends about the news. One of them tipped his father, the DOJ said.
Yardley resident Daniel Perez, one of the friends, was arrested and charged with conspiracy to commit securities fraud. The other friend, Richard Yu of Pennington, N.J., pleaded guilty to securities fraud. His father, Pennington resident Chiang Yu, also pleaded guilty to securities fraud.
Kita admitted to gains of between $250,000 and $550,000 from his scheme, according to the DOJ. Chiang Yu acknowledged his offense earned between $95,000 and $150,000, while his son confessed to about $200,000 secured from his role in the scheme, the department said.
Conspiracy to commit securities fraud can bring up to five years in prison and a $250,000 fine. Securities fraud comes with the potential for 20 years in prison and a $5 million fine.
The Securities and Exchange Commission also brought parallel civil charges against the four men.
After leaving Celator in April 2016, Kita received a text message from an unnamed friend there describing “some juice” about the company’s upcoming acquisition, according to the SEC. Kita then used an encrypted smartphone application to tell Perez and Richard Yu that Celator’s stock was “gonna pop,” the agency said.
Kita, while at Celator, also tipped Perez and Richard Yu about the positive results from the clinical trials for Vyxeos, which treats myeloid leukemia, according to the commission.
Chiang Yu received both tips about the acquisition and the cancer drug from his son, the SEC said.
''The investing public relies on accountants and other gatekeepers to safeguard confidential information, not use it for personal profit,’' Kelly Gibson, associate director of the SEC’s Philadelphia Regional Office, said in a statement. ''When gatekeepers violate that public trust as Kita allegedly did, the SEC is committed to holding them accountable.’'
Robert Heim of Meyers & Heim LLP in New York, who is representing Kita, told Bloomberg BNA his client “made a terrible mistake, which he is very remorseful for.” Kristen Santillo of Krovatin Klingeman LLC in Newark, N.J., who is representing Chiang Yu, told Bloomberg BNA he “regrets his illegal trading, and has taken responsibility.” Attorney Louis Busico in Newtown, Pa., who is representing Perez, said his client “strongly maintains his innocence and looks forward to clearing his name at trial.”
A lawyer for Richard Yu didn’t immediately respond to a request for comment.
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To view this complaint, visit: https://www.sec.gov/litigation/complaints/2017/comp-pr2017-151.pdf
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