The Securities and Exchange Commission (SEC) has recently charged British investor Joseph C. Lewis for illegally tipping off his then-girlfriend, Carolyn W. Carter, and his two private pilots, Patrick J. O’Connor, and Bryan L. Waugh, with material nonpublic information. The information was used to execute trades that resulted in combined profits of over $545,000. Lewis, who is a majority owner of a biotechnology investment fund, allegedly breached his duty of confidentiality between July and October 2019 by sharing this information with Carter, O’Connor, and Waugh.
SEC Slaps Investor Joseph C. Lewis and Associates with Charges Over Insider Trading
The Securities and Exchange Commission (SEC) has today leveled charges against Joseph C. Lewis, accusing him of unlawfully sharing sensitive, undisclosed information with his then-girlfriend, Carolyn W. Carter, and his two private pilots, Patrick J. O’Connor and Bryan L. Waugh. The information was allegedly used to make lucrative trades, with the trio netting profits exceeding $545,000.
Who is Joseph C. Lewis?
Lewis, a UK citizen primarily based in The Bahamas, is a biotechnology investment fund’s controlling figure and majority owner. The fund regularly deals with confidential information about its portfolio companies. According to the SEC, Lewis violated his duty of confidentiality by sharing undisclosed information with Carter twice and with O’Connor and Waugh once between July and October 2019.
What Exactly Did Lewis Do?
The SEC’s complaint alleges that in July 2019, Lewis discovered that one of the fund’s portfolio companies was planning a capital raise through a transaction type that typically leads to a surge in share price. Lewis is said to have met with Carter in a plush hotel room the same day he received this information. Carter reportedly purchased over $700,000 of the company’s common stock within three hours of the meeting. When the transaction was announced the next day, the company’s share price jumped approximately 34.4 percent, earning Carter a cool profit of over $172,000.
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In September 2019, the SEC alleges, Lewis received undisclosed information about another portfolio company that had obtained positive results in a clinical trial set to be presented at a conference the following month. The SEC claims Carter, and later O’Connor and Waugh, purchased the company’s common stock. Lewis allegedly gifted this information to O’Connor and Waugh as a replacement for a formal retirement plan and loaned each $500,000 to execute the trades. The company’s share price rose by 16.7 percent following the public announcement of the positive clinical trial data in October 2019, resulting in combined profits for Carter, O’Connor, and Waugh of over $373,000.
What Are the Charges and What Does This Mean for Investors?
The SEC’s complaint, submitted to the U.S. District Court for the Southern District of New York, accuses Lewis, Carter, O’Connor, and Waugh of violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking permanent injunctive relief and civil penalties from all defendants, as well as the return of ill-gotten gains with prejudgment interest from Carter, O’Connor, and Waugh. The spouse of Mr. O’Connor, Jean J. O’Connor, has also been named as a relief defendant.
In a concurrent action, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against Lewis.
This case serves as a stark reminder of the importance of market integrity and the potential consequences of insider trading. It emphasizes the SEC’s commitment to protecting investors and ensuring a fair and level playing field for all.
