Insider trading is fraud that costs Americans enormous sums when a few people with privileged knowledge take advantage of that information for their own personal gain in the stock market. Cheng Yi Liang, a former FDA chemist, will be paying the price for insider trading based on non-public information he had access to as an FDA scientist. He has been sentenced to five years in prison for multiple incidents of insider trading in the pharmaceuticals securities market that gained him a total of $3.7 million.
As part of the Securities and Exchange Commission’s (SEC) civil enforcement action against Mr. Liang, the proceeds of his illegal activity must be forfeited. So far, the government has recovered over $1 million and continues to pursue additional property acquired through Mr. Liang’s insider trading scheme.
As an FDA chemist in the Office of New Drug Quality Assessment (NDQA), Mr. Liang had access to the FDA password-protected tracking system for new drug applications. This system, called the Document Archiving, Reporting and Regulatory Tracking (DARRTS) system, allows the FDA to manage, track, and report on the progress of new drug applications. Liang was able to retrieve non-public information from DARRTS that revealed the progress of experimental drugs as they passed through the FDA approval process.
Mr. Liang admitted in his plea that from about July 2006 to about March 2011, he used material, non-public information obtained from DARRTS and other sources to trade in the pharmaceuticals securities market, sometimes using the accounts of family and friends to make these illegal trades. His actions, he admitted, violated his duties of trust and confidence to the FDA. Because Mr. Liang knew before the public did whether the information on a new drug application was positive or negative, he could buy or sell in advance based on his inside information and reap huge profits when the information became public.
In an attempt to hide his insider trading from the FDA, Mr. Liang failed to disclose income and brokerage accounts he controlled on required FDA annual financial disclosure forms, effectively lying repeatedly to the government about his illegal activity.
Waters & Kraus is a national firm with highly skilled lawyers practicing qui tam litigation in four offices, including Dallas, Los Angeles, San Francisco, and Baltimore. Our attorneys have decades of experience successfully representing whistleblowers who come forward with evidence of fraud. Contact us or call our attorneys at 800.226.9880 to learn more about our practice and how we can assist.