SEC Charges Investor Joseph C. Lewis and Associates with Insider Trading, Reaping Over $545,000 in Illicit Profits

Imagine that one player in a poker game can see all the other players’ cards. Unfair, right? That’s what happened in the world of high-stakes securities trading. The Securities and Exchange Commission has accused investor Joseph C. Lewis, of using confidential information to his personal advantage. This is not just one man’s story. Lewis is said to have shared this information, which led him and his private pilots Patrick J. O’Connor (his then girlfriend) and Bryan L. Waugh (his other two private pilots), to make trades worth over $545,000.

What is Joseph C. Lewis all about?

Joseph C. Lewis is a British citizen who lives primarily in The Bahamas. He’s not the average investor. He is also the majority owner and controller of a biotechnology investing fund. Imagine you are the captain and can direct your ship wherever you please. Lewis and his investment fund. Lewis used his job to access information that was not public about the portfolio companies of the fund and then tipped Carter O’Connor and Waugh off between July and Oct 2019.

Insider Trading Allegations

Imagine this as a dramatic two-part story with high stakes. Lewis learned, in the first act of July 2019, that a fund he had invested in planned to raise capital via a transaction which often resulted in an increase in share prices. Picture a gold The mine is about to hit a rich vein. Lewis is said to have shared this information during a hotel meeting with Carter. Carter bought $700,000 of common stock in the company within three hours. Carter’s profit was over $172,000 after the stock price of the company rose by approximately 34.4 percent.

Lewis learned that in September 2019, another company in his portfolio had achieved positive results during a clinical test. Imagine that a horse has just won an important race. Lewis is accused of sharing this information again. Carter, O’Connor and Waugh purchased the common stock. Lewis allegedly provided this information to O’Connor, and Waugh as a replacement for a retirement plan. He even lent them each $500,000 in order to make the trades. The company’s share price increased by 16.7 percent when it announced positive clinical trial results in October 2019. The trio earned more than $373,000 after the announcement.

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Legal Consequences

In its complaint filed before the U.S. District Court of New York’s Southern District, the SEC accuses Lewis Carter O’Connor and Waugh of violating Section 10b of the Securities Exchange Act of 1933 and Rule 10b-5. What does this mean exactly? This is like getting caught in the act of playing poker and having an extra ace hidden up your sleeve. The SEC seeks:

  • Permanent injunctive relief
  • Civil penalties
  • Carter, O’Connor and Waugh must pay interest on ill-gotten gains.

Lewis has been charged with criminal offenses by the U.S. Attorney’s Office of the Southern District of New York.

Investigation and Litigation

Tim Work leads a team that includes Emily Shea as well as Howard Kaplan and Kevin Gershfeld. Carina cuellar will supervise the litigation, along with Kristen Warden and Tim Work. The SEC thanked the U.S. Attorney’s Office for Southern District of New York as well as the Federal Bureau of Investigation and the Financial Industry Regulatory Authority for their assistance. It takes a village, as the saying goes to catch a fraudster.

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