Alleged Biotech Pump and Dump Scheme in Derivative Securities

Case Overview

This case study delves into a complex scenario involving derivative securities within the biotech sector. The defendants, a hedge fund, allegedly leveraged their controlling 62% ownership of a biotech company to orchestrate a pump-and-dump scheme.

It is claimed that they influenced the board of directors and manipulated press releases related to vaccine development, leading to an increase in stock value. At this opportune moment, they sold their share of the company. The central issue lies in examining warrant amendments and determining whether these changes unfairly advantaged the defendants.

Questions to the Finance expert and their responses

Could you describe your professional background in investment banking and securities, specifically trading small cap stocks?

I bring 25 years of experience trading derivative securities at high levels of complexity and size. My tenure includes serving as global head of equity derivatives at a top-tier financial institution where I was also a partner for ten years.

How familiar are you with section 16(b) of the Securities Exchange Act of 1934 concerning warrant amendments?

I am well-acquainted with Section 16(b), often referred to as the short-swing rule. This rule prohibits insiders from making short-term profits, defined as completed transactions within a six-month timeframe. Most relevant to this case, I understand its applicability to equity-linked securities.

Have you ever reviewed a similar case? If yes, could you elaborate?

Yes, I have served as both an expert witness and a fact witness in a case from my previous career in investment banking. In that role, I wrote a report and was deposed by opposing counsel.

About the expert

This expert has an extensive background in finance, with a specialization in equity derivatives, structured products, and exchange-traded funds. They hold an MA in Economics from a prestigious university and have held high-ranking positions at major financial institutions, including serving as the head of European derivatives and later as the global head of equities. Currently, this expert applies their vast knowledge and experience as a managing partner at a legal consultancy.