Federal regulators on Thursday expanded their civil insider-trading charges against a chemist with the Food and Drug Administration accused of using confidential FDA information on pending drug approvals to profit from trades of drug companies' stock.
Cheng Yi Liang is facing both civil and criminal charges of running an insider trading scheme starting in November 2007. He and his son were arrested in March on charges including securities fraud and wire fraud.
The Securities and Exchange Commission said Thursday it filed a revised civil lawsuit against Liang, alleging he illegally traded in advance of a public announcement on FDA approval of XenoPort Inc.'s Horizant. That was the 28th announcement the SEC says Liang traded ahead of, in addition to the 27 cited in the agency's suit filed in federal court in Greenbelt, Md., on March 29.
The agency's revised suit "shows Liang had one more illegal trade in the pipeline when we charged him," SEC spokesman John Nester said in a statement. "That trade was not expected to pay off until after we put a stop to his fraudulent scheme."
Horizant was developed to treat restless leg syndrome. Liang made more than $126,000 in profits on XenoPort's stock, the SEC said. He is accused of making a total $3.6 million in the trading scheme.
Liang's lawyer, Andrew Carter, didn't immediately return a telephone call seeking comment Thursday.
The SEC is seeking unspecified restitution and fines against Liang.
Liang looked up the status of the FDA's review of Horizant on a confidential database at least 52 times between Jan. 6 and March 24, the SEC said. He bought 43,000 shares of XenoPort in accounts in other people's names in February and March.
The announcement of the approval of Horizant came on April 6, about a week after Liang was charged by the SEC and federal prosecutors. It boosted the price of XenoPort stock by 56 percent, according to the SEC.
The new SEC complaint adds an eighth brokerage account to those it says Liang used to avoid getting caught. That one was in the name of his father, the agency said.
The Wall Street Journal reported Thursday that the government has expanded its investigation of insider trading at the FDA to cover other government employees besides Liang. The Journal cited unidentified people familiar with the matter.
Nester declined to comment on the report.