Hedge fund manager in insider-trading case dead in apparent suicide

Hedge fund manager Sanjay Valvani, charged last week in one of the most significant insider-trading prosecutions in recent months, was found dead in his home the evening of June 20, an apparent suicide, authorities said.

Sanjay Valvani


Sanjay Valvani

Valvani, 44 years old, was found by his wife in the bedroom of their Brooklyn home with a slash wound to his neck, said a New York Police Department spokesman. He was pronounced dead around 6:30 p.m.

It will be up to the New York City Office of Chief Medical Examiner to determine the exact cause of death, but responding officers recovered a knife and a suicide note near Valvani’s body, the NYPD spokesman said.

“This is a horrible tragedy that is difficult to comprehend,” Valvani’s attorneys, Barry Berke and Eric Tirschwell, said in a statement. “Sanjay Valvani was a loving father, husband, son and brother and committed friend, colleague and mentor. We hope for the sake of his family and his memory that it will not be forgotten that the charges against him were only unproven accusations and he had always maintained his innocence.”

Valvani most recently had been working as a portfolio manager of the hedge fund firm Visium Asset Management. He recently had been placed on leave at the fund.

His death comes less than a week after US Attorney Preet Bharara unveiled charges against him, accusing him of trading on confidential information about generic-drug approvals. A second portfolio manager at the firm pleaded guilty in connection with similar trades.

Visium told investors late last week that it will close shop after liquidating its flagship fund and selling another, The Wall Street Journal reported on June 17.

Valvani, who focused on specialty pharmaceutical investments at the health-care-focused fund, allegedly obtained the inside tips from former Food and Drug Administration official Gordon Johnston, 64, who pleaded guilty to wire and securities fraud in connection with the case. Valvani pleaded not guilty last week in federal court in Manhattan.

A lawyer for Johnston previously declined to comment.

Visium founder Jacob Gottlieb said in a statement, “We mourn the tragic loss of Sanjay…a devoted father, husband and friend. Our thoughts are with his family during this difficult time.”

The case is among the first criminal actions to emerge from an investigation focused on how Wall Street gathers information from Washington.

For several years, federal investigators have been scrutinising communications between Washington research firms and Wall Street investors, looking for confidential government information exchanging hands.

The Securities and Exchange Commission and Justice Department are pursuing a separate probe into an April 2013 leak of information from the Medicare and Medicaid agency to investors concerning a coming announcement that would benefit health-insurance firms.

The prosecution also recalls the heights of a yearslong hedge-fund crackdown by Bharara, which has slowed since an appeals court ruling in 2014 made it more difficult for prosecutors to bring such cases.

A spokesman for the US attorney’s office declined to comment on June 21.

The connection between Valvani and the former FDA official began in the mid-2000s, according to court documents, when Visium retained Johnston as a consultant to provide information on the likelihood the FDA would approve generic-drug applications.

The SEC, which filed related civil charges, said in court papers that Johnston learned in 2009 and 2010 through “indirect” and “triangulating” questions to a former colleague that the FDA was likely to approve a generic application for the drug enoxaparin, which he passed on to Valvani. Momenta, a generic-drug manufacturer, sought approval to make the drug, which is an anticoagulant.

At the time, Johnston worked for a generic-drug industry association, and the former colleague believed Johnston would use the information in the context of his employment there, the SEC said.

According to prosecutors, Valvani ended the relationship with Johnston more than five years ago, in January 2011. In a phone call, Valvani said Visium could no longer pay him as a consultant in light of news reports on insider-trading investigations, prosecutors said.

Berke, Valvani’s attorney, has said his client is innocent and called the case “another example of this United States Attorney’s office stretching the facts and law to try to transform entirely innocent trading decisions into a crime.”

During his plea hearing last Wednesday, US marshals led Valvani from a holding cell into the Manhattan courtroom. Valvani, who wore a light blue shirt and slacks with no belt, commonly removed by the marshals for safety reasons, appeared slightly stunned.

Berke requested Valvani be allowed to leave New York while released on bail so that he could travel to watch his two daughters, who Berke said are competitive athletes. US District Judge Sidney Stein approved the request, and released Valvani on a $ 5 million bail package, secured by Valvani’s Brooklyn home, which Berke said was worth about $ 10 million to $ 12 million.

Tuesday morning, no one answered the door at Valvani’s home, a well-maintained four-story brick building on a quiet street in the wealthy Brooklyn Heights neighbourhood.

Neighbours on June 21 described the Valvanis as a private family. Rev. Edward Doran, pastor of the St. Charles Borromeo Church across the street from the Valvani home, said he would see Valvani every morning walking his two dogs, one big and one small, and that Valvani would always say hello.

Father Doran said neighbors are saddened. “Myself, I think of his wife and children. To lose a father is devastating…and the day after Father’s Day.” ​

Valvani was a member of the board of visitors at Duke University’s Fuqua School of Business, where he received his MBA in 2001. He also endowed two scholarships at the school. According the school’s website, Valvani’s parents came to study at the University of Michigan in the 1960s from “humble beginnings” in India. Valvani finished his undergraduate studies at the University of North Carolina before working for four years as a health-care consultant. With an eye to working on Wall Street, Valvani enrolled at Duke, the website said.

Valvani joined Citigroup’s Salomon Smith Barney as an analyst following his graduation, before going to work for Gottlieb, then a portfolio manager at Balyasny Asset Management, in May 2003. Dr. Gottlieb two years later formed Visium Asset Management, and Valvani became a partner.

Write to Pervaiz Shallwani at pervaiz.shallwani@wsj.com and Christopher M. Matthews at christopher.matthews@wsj.com

Thomas MacMillan, Aruna Viswanatha and Rob Copeland contributed to this article, which was published by The Wall Street Journal

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