Securities Law Blog

The Justice Department and the Securities and Exchange Commission (SEC) have charged Cheng Yi Liang with trading on confidential information he obtained while an employee of the U.S. Food and Drug Administration (FDA). Liang, a chemist at the FDA since 1996, allegedly traded in advance of at least 27 different FDA announcements involving 19 different publicly traded companies.

Liang reportedly began trading shares in 2006 while working in the FDA’s Center for Drug Evaluation and Research; the division in charge of approving new drugs. Due to Liang’s position at the FDA, he had access to the agency’s password-protected tracking system used to manage drug applications and drug-safety issues. Liang was reportedly able to review documents as they passed through the FDA approval process.

According to the SEC’s complaint, Liang bought stocks for profit before positive announcements, bet on shares falling after negative ones and sold shares to avoid losses, generating more than $3.6 million in illicit profits and avoided losses.

Liang allegedly financed his trading with a home-equity line of credit and used seven brokerage accounts that weren’t in his name to help conceal his insider trading scheme.