Alleged Biotech Pump and Dump Scheme in Derivative Securities

This case study delves into an alleged "pump and dump" scheme involving a hedge fund's manipulation of its controlling stake in a biotech company.

ByZach Barreto

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Published on February 1, 2024

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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

Q1

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.

Q2

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.

Q3

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.

Expert headshot

E-1038473

Specialties:

About the author

Zach Barreto

Zach Barreto

Zach Barreto is a distinguished professional in the legal industry, currently serving as the Senior Vice President of Research at the Expert Institute. With a deep understanding of a broad range of legal practice areas, Zach's expertise encompasses personal injury, medical malpractice, mass torts, defective products, and many other sectors. His skills are particularly evident in handling complex litigation matters, including high-profile cases like the Opioids litigation, NFL Concussion Litigation, California Wildfires, 3M earplugs, Elmiron, Transvaginal Mesh, NFL Concussion Litigation, Roundup, Camp Lejeune, Hernia Mesh, IVC filters, Paraquat, Paragard, Talcum Powder, Zantac, and many others.

Under his leadership, the Expert Institute’s research team has expanded impressively from a single member to a robust team of 100 professionals over the last decade. This growth reflects his ability to navigate the intricate and demanding landscape of legal research and expert recruitment effectively. Zach has been instrumental in working on nationally significant litigation matters, including cases involving pharmaceuticals, medical devices, toxic chemical exposure, and wrongful death, among others.

At the Expert Institute, Zach is responsible for managing all aspects of the research department and developing strategic institutional relationships. He plays a key role in equipping attorneys for success through expert consulting, case management, strategic research, and expert due diligence provided by the Institute’s cloud-based legal services platform, Expert iQ.

Educationally, Zach holds a Bachelor's degree in Political Science and European History from Vanderbilt University.

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