Investigation for fraud
A former trader with the firm, Jason Thorell, told the U.S. Securities and Exchange Commission in 2013, according to Reuters, that "Visium employees routinely sought sham quotes from brokers to justify inflated values for debt securities, and deviated from prices set by third-parties on a magnitude beyond what was usual."[9] Thorell would cooperate with federal investigators who asked him to secretly record individuals at the firm including Gottlieb's brother-in-law Lumiere.[10][9] He cooperated with federal investigators and secretly recorded over 200 hours of conversations with individuals at the firm over two years.[11]
In March 2016, Visium notified shareholders that Visium was being investigated by the United States Department of Justice and the U.S. Securities and Exchange Commission regarding the company's actions in regard to their Credit Opportunities Fund which had been shut down in 2013.[6] The investigation led to large customer withdrawals.[12] Later in June, three traders at the firm were charged with securities fraud.[2][13] Sanjay Valvani and Chris Plaford were indicted for insider trading while Plaford and Stefan Lumiere were accused of inflating the value of the Credit Opportunities Fund.[3]
The Securities and Exchange Commission barred former portfolio manager, Christopher Plaford, from the securities industry after charges that he inflated asset prices under a fraudulent scheme at Visium Asset Management.[14] In 2016, Plaford pleaded guilty to securities fraud and was permanently banned from the securities industry.
Separately, Plaford's cooperation with the government led to a jury conviction of a research consultant, David Blaszczak, the founder of Precipio Health Strategies, for violating insider-trading rules by obtaining and relaying nonpublic information from the Centers for Medicare and Medicaid Services about coming changes in health-care policy to Deerfield Management. The jury also convicted the government employee who leaked the tips as well as a pair of Deerfield Management employees who made trades based on the information.[15][16]
Later, Steven Ku, Visium's former Chief Financial Officer, agreed to be barred from the securities industry for one year and pay $100,000 to settle the agency's allegations that he failed to supervise portfolio managers Christopher Plaford and Stefan Lumiere. [17][18]
United States v. Valvani; suicide
In 2016, portfolio manager Sanjay Valvani and two others were charged with insider trading by federal prosecutor Preet Bharara, the United States Attorney for the Southern District of New York.[19][12] While managing the firm's flagship healthcare fund, according to federal authorities, "Valvani specifically made about $25 million by trading on non-public information about pending drug approvals from the Food and Drug Administration".[2] Valvani had worked for the company since its inception in 2005, and reportedly managed as much as $2 billion in funds.[19]
Valvani turned himself in to authorities on June 15, 2016, and was arrested.[2][20]
