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Litigation Release No. 22171 / November 30, 2011

Securities and Exchange Commission v. Cheng Yi Liang, et al.,, Civil Action No. 8:11-cv-00819-DKC (D. Md.)

Former FDA Chemist Settles SEC Insider Trading Charges

The Securities and Exchange Commission announced that on November 29, 2011, the Honorable Deborah Chasanow, United States District Judge for the District of Maryland, entered a final judgment against Cheng Yi Liang, in SEC v. Cheng Yi Liang, et al., C.A. No. 8:11-cv-00819-DKC (D. Md.), an insider trading case the SEC filed on March 29, 2011. Liang is a former U.S. Food and Drug Administration (FDA) chemist who worked in the FDA's Center for Drug Evaluation and Research.

The complaint, amended June 2, 2011, alleged that from at least July 2006 until March 2011, Liang traded based on confidential information he obtained from the FDA in advance of at least 28 public announcements about FDA drug approval decisions for profits and losses avoided of more than $3.7 million. Liang concealed his trading by trading in eight brokerage accounts in the name of six nominees, including his 84-year-old mother and 87-year-old father, both citizens and residents of China. For example, the SEC alleged that Liang traded in advance of an FDA announcement approving Clinical Data's application for the drug Viibryd. Liang accessed a confidential FDA database that contained critical documents and information about the FDA's review of Clinical Data's application, and then used that information to purchase more than 46,000 shares of Clinical Data at a cost of more than $700,000. After the markets closed on Friday, January 21, 2011, the FDA issued a press release approving Viibryd. Clinical Data's stock price rose by more than 67 percent the following Monday and Liang sold his entire Clinical Data position in less than 15 minutes for a profit of approximately $380,000. To settle the SEC's charges, Liang, without admitting or denying the allegations in the complaint, agreed to entry of a final judgment that: (i) enjoins him from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, thereunder; and (ii) requires Liang to pay disgorgement of $3,776,152, which will be deemed satisfied by the forfeiture order entered in the parallel criminal case, United States v. Cheng Yi Liang, Criminal No. 8:11-cr-00530-DKC8 (D. Md.). In that case, Liang pleaded guilty to charges of securities fraud and making false statements.

For further information, see Litigation Release Nos. 21907 (March 29, 2011) and 21987 (June 2, 2011).



Modified: 11/30/2011