U.S. authorities charged three brothers, an investment banker and a couple of other friends for allegedly engaging in insider trading as well as a market manipulation scheme that involved impersonating doctors and breast cancer patients, and falsifying clinical trial results.
The U.S. Securities and Exchange Commission (SEC) charged the brothers — Muhammad Saad Shoukat, Muhammad Arham Shoukat, and Muhammad Shahwaiz Shoukat — along with their friends Izunna Okonkwo, Daniyal Khan and Justin Kim, in connection with a couple of alleged market manipulation schemes and an alleged US$41-million insider trading scheme.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey also filed a variety of criminal charges (including securities fraud, insider trading, and a variety of conspiracy charges) against the six men.
None of the allegations have been proven in court.
In its complaint, the regulator alleged that between June 2020 and February 2024, Kim — a San Francisco-based investment banker — tipped Saad Shoukat to nine potential merger and acquisition deals that he learned about at work.
In turn, Shoukat allegedly tipped his brothers, Khan and Okonkwo, and they traded on that inside information, allegedly generating US$41 million in illicit trading profits.
Additionally, the SEC alleged that the brothers manipulated the securities of two U.S. drug companies, Olema Pharmaceuticals Inc. and Opiant Pharmaceuticals Inc.
According to the complaint, in the Olema case, two of the brothers (Saad and Arham) allegedly posed as doctors to steal confidential information about the company’s clinical trials, and then used the identities of metastatic breast cancer patients who participated in online forums to publish falsely positive results for those trials, in an effort to boost the company’s stock price.
The SEC alleged that they traded the company’s stock before it corrected the misinformation, profiting from the temporarily inflated stock price.
In a second scheme, the SEC alleged that the Shoukat brothers purchased Opiant stock based on a tip from Kim, indicating that Opiant was a takeover target. However, when that deal didn’t materialize, the brothers allegedly issued a false press release that touted a fictitious partnership deal, boosting Opiant’s stock price, so they could cash out of their Opiant stock at an elevated price.
The SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains with interest and civil penalties against the six men, along with a permanent prohibition against Kim.