U.S. Securities and Exchange Commission Litigation Release No. 26383, dated June 12, 2023.
The SEC charged a former director of Chinook Therapeutics, Rouzbeh Haghighat, and four associates with insider trading. Haghighat allegedly shared confidential information about an upcoming acquisition by Novartis with his brother, stepdaughter, and two friends. These individuals then traded Chinook stock and options, making over $500,000 in illicit profits before the acquisition was publicly announced.
In Plain English
Imagine a company director learns a big company is going to buy their company, which will make the stock price go up. This director secretly tells his family and friends about this secret deal before it's announced to everyone. Then, his family and friends buy a lot of the company's stock, knowing it will soon be worth more. When the deal is announced, the stock price jumps, and they quickly sell their shares, making a lot of money they shouldn't have. The SEC is taking them to court to get the money back and punish them.
Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.
How the Alleged Scheme Worked
- Director Learns of Acquisition Rouzbeh Haghighat, a director at biopharmaceutical company Chinook Therapeutics, Inc., learned material, non-public information about an impending acquisition of Chinook by Novartis AG during confidential negotiations.
- Breach of Duty Haghighat allegedly breached his duty to protect Chinook's confidential information by tipping his brother, Behrouz “Bruce” Haghighat, his stepdaughter Kirstyn Pearl, and his friends James Roberge and Seyedfarbod “Fabio” Sabzevari about the acquisition.
- Tipped Individuals Aware The complaint alleges that Bruce Haghighat, Kirstyn Pearl, James Roberge, and Fabio Sabzevari knew or were reckless in not knowing that Ross Haghighat was a director and that he was conveying this information in breach of his duty.
- Trading Ahead of Announcement Based on the non-public information received from Ross Haghighat, Bruce Haghighat, Kirstyn Pearl, James Roberge, and Fabio Sabzevari allegedly purchased Chinook common stock and/or options before the acquisition was publicly announced.
- Director's Own Trade Ross Haghighat also allegedly purchased Chinook common stock in a custodial account he managed for a minor stepchild just four days before the acquisition announcement.
- Acquisition Announced On June 12, 2023, before the market opened, Novartis AG publicly announced its acquisition of Chinook Therapeutics, Inc.
- Stock Price Surges Following the announcement, Chinook's stock price increased significantly, closing at $37.98 per share, an approximately 58% rise from the prior day's closing price.
- Illicit Profits Realized Collectively, the defendants made over $500,000 in illicit profits from their trades in Chinook securities, which were based on the material non-public information obtained from Ross Haghighat.
The Enforcement Action
The SEC charged Rouzbeh Haghighat, Behrouz Haghighat, Kirstyn Pearl, Seyedfarbod Sabzevari, and James Roberge with violations of antifraud provisions. The SEC seeks injunctive relief, disgorgement of illicit profits, prejudgment interest, and civil monetary penalties. The SEC also seeks an officer and director bar against Ross Haghighat. In a parallel action, the U.S. Department of Justice announced criminal charges against the same individuals.