SEC charges Massachusetts man with illegal trading on inside tip from drug executive

By Elaine Rigoli

Tampa, Fla., June 23 - The Securities and Exchange Commission announced the filing of an amended complaint in SEC v. Yaroshinsky, a case pending in the U.S. District Court for the Southern District of New York.

The amended complaint adds Victor E. Zak as a defendant in the SEC's previously filed insider trading case against California drug executive Alexander J. Yaroshinsky.

The complaint alleges that Zak, a resident of Newton, Mass., received non-public information from Yaroshinsky concerning the Food and Drug Administration staff's preliminary analysis of the carcinogenicity tests of Velac Gel, an acne drug being developed by Yaroshinsky's then-employer, California-based Connetics Corp.

The amended complaint alleges that both Zak and Yaroshinsky traded on the basis of this information and that Zak profited from his illegal trading by more than $900,000 and together, Yaroshinsky and Zak benefited financially by more than $1.58 million.

The complaint alleges that on April 13, 2005, Yaroshinsky and other Connetics representatives participated in a telephone call with FDA staff who allegedly told Connetics that the FDA's executive carcinogenicity assessment committee had concluded that the Velac Gel vehicle may be a "tumor promoter or a carcinogen" and that "this is a serious issue for a topical product for the treatment of acne."

Shortly after the call, Yaroshinsky allegedly called Zak and told him what he had learned earlier that day from the FDA staff.

The complaint alleges that Zak began executing transactions that positioned him to benefit from a drop in Connetics' share price.

Specifically, the amended complaint alleges that Yaroshinsky and Zak violated Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. Among other relief, the complaint seeks a permanent injunction, disgorgement of all illegal profits, prejudgment interest and the imposition of civil monetary penalties.

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