U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19636 / April 3, 2006
SEC v. Alexander J. Yaroshinsky, Civil Action No. 06CV2401 (S.D.N.Y., filed March 28, 2006)
Federal Court Issues Preliminary Injunction Order Against Alexander J. Yaroshinsky
The United States Securities and Exchange Commission announced that on March 31, 2006, the Honorable Judge Richard C. Casey, a federal judge in the Southern District of New York, entered a preliminary injunction order, by consent, against Alexander J. Yaroshinsky, Vice President of Biostatistics and Clinical Operations at California-based Connetics Corp. The preliminary injunction will continue to restrain Yaroshinsky from violating certain antifraud provisions of the federal securities laws. Also by consent, Judge Casey ordered that Yaroshinsky's assets remain frozen subject to carve-outs for specified expenses until further notice, and granted other relief. The preliminary injunction order continues the relief originally obtained on March 28, 2006, in response to the Commission's emergency civil injunctive action that sought a temporary restraining order, an order freezing assets, disgorgement and civil penalties, and other relief against Yaroshinsky based on his alleged violations of the federal securities laws. The Commission continues to seek, among other things, a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and civil money penalties.
The Commission's complaint alleges that Yaroshinsky, who participated in tests which led the FDA to ultimately conclude that the drug was "unsafe for use," learned the FDA's preliminary views with respect to the cancer tests in an April 13, 2005 call with the FDA. Shortly thereafter, Yaroshinsky positioned himself to profit from a fall in the price of Connetics' stock. In accounts he controlled, Yaroshinsky sold 15,100 previously acquired Connetics shares, and bought 2,076 put contracts which gave him the right to sell Connetics shares at a fixed price and profit when the shares fell below that price. Ultimately, on June 13, 2005, when news of the non-approval was made public, Connetics' share price fell 27% and Yaroshinsky reaped a benefit of at least $680,000.
The preliminary injunction enjoins Yaroshinsky from violating Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. Yaroshinsky consented to the preliminary injunction, continued asset freeze, and other relief, without admitting or denying the SEC's allegations.