Biopharmaceutical Consultant Faces Criminal and Civil Insider Trading Charges

In case there was any doubt, insider trading enforcement—including DOJ criminal and SEC civil charges—remains a priority to kick off the new year. Last week, the U.S. Attorney’s Office for the District of Massachusetts brought three counts of securities fraud against Hong (John) Wang, a New Jersey resident, who worked as a consultant for C4 Therapeutics, Inc. (C4), a clinical-stage biopharmaceutical company based in Massachusetts. The same day, the SEC brought civil charges against Wang and his company, Precision Clinical Consulting LLC (Precision) for insider trading.

In parallel actions filed in the U.S. District Court for the District of Massachusetts, both the DOJ and SEC alleged that Wang learned of C4’s plan to announce positive clinical test results, bought C4 shares across several brokerage accounts, and then sold those shares after C4’s announcement, resulting in close to half a million dollars in realized and unrealized gains.

Key Takeaways:

• Public companies should ensure that their consulting agreements include strict confidentiality provisions, that consultants are trained on, or are otherwise explicitly reminded of their duties of confidentiality and require that consultants sign an attestation that they will comply with the companies’ insider trading policies and maintain the confidentiality of any material non-public information (MNPI) they gain during their consultancy.
• Public companies should ensure that MNPI—such as clinical trial results or other information that is likely to move the market—is released only to those who need to know the information to perform their duties and with an explicit reminder of the recipient’s duty of confidentiality.
• Executives, board members, and others who are likely to receive MNPI during their public company service should consider entering into Rule 10b5-1 trading plans, which, when properly adopted, serve as an affirmative defense to insider trading charges. Among other requirements, these plans must be adopted when the individual is not in possession of MNPI.
• Investing in strong insider trading and other compliance programs earlier, including strong document management systems, could mitigate the risk of insider trading by employees and consultants and reduce both reputational risk and the expense and burden to public companies of responding to government insider trading investigations. 

Summary of Charges:

According to the SEC’s complaint and DOJ’s indictment, Wang obtained MNPI while performing biostatistical consulting work for C4 regarding the positive clinical trial results for C4’s flagship drug. Wang’s consulting firm, TechData International LLC (TechData), allegedly contracted with C4. Wang signed the consulting agreement between C4 and TechData and served as the sole TechData employee that worked for C4. Further, the government has asserted that the consulting agreement contained explicit confidentiality provisions warning about the illegality of insider trading and that Wang purportedly received trainings in the several months before he first purchased C4 stock.

The government alleged that while in possession of MNPI, Wang purchased 160,430 shares of C4 between November 20, 2023, and December 12, 2023—including 76,740 shares purchased mere hours before C4 publicly announced the trial’s results. After the announcement on December 12, 2023, C4’s stock price increased, and Wang generated approximately $489,739 in realized and unrealized profits. The SEC further alleged that the trades were executed across multiple brokerage accounts, including two accounts under Wang’s name, one joint account with his wife, and one account held by Precision. According to the SEC, Wang’s accounts had never previously traded C4 securities.

The DOJ charged Wang with three counts of criminal securities fraud—carrying a maximum prison sentence of 20 years and a fine of up to $5 million—and seeks criminal forfeiture of the alleged ill-gotten gains held across four investment accounts. The SEC charged Wang and Precision with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and seeks permanent injunctive relief and civil penalties against Wang and disgorgement plus prejudgment interest from Wang and Precision.