Ex-Lazard Banker’s Insider Tips Reaped $41 Million Haul, US Says

A former dealmaker at Lazard Ltd., one of Wall Street’s most prominent investment banks, is accused by U.S. authorities of providing tips on health care deals to a friend’s network of insider traders who reaped $41 million in illicit profits.

Justin Kim, who now faces both criminal and regulatory charges, received a Rolex watch and career advice while leaking 10 potential takeovers over several years through 2023, according to a U.S. Securities and Exchange Commission complaint seeking to ban him from the industry. Last month, the Justice Department announced fraud and insider trading charges against Kim, which carry penalties of up to 25 years in prison.

His friend Muhammad Saad Shoukat, his two brothers and other defendants allegedly used this information for well-timed bets ahead of the takeover. The deals included Gilead Sciences Inc.’s acquisition of Immunomedics Inc. for $21 billion in 2020, CVS Health Corp.’s acquisition of Oak Street Health Inc. for $10.6 billion and AbbVie Inc.’s acquisition of ImmunoGen Inc. for $10.1 billion in 2023; This was one of the three largest deals Lazard had worked on in this sector in the last decade.

While Lazard has not been accused of wrongdoing, the scheme is coming to light as Chief Executive Peter Orszag seeks to build the firm’s healthcare franchise amid a rise in global mergers and acquisitions. Illegal tips allegedly preceded deals worth more than $60 billion, according to Bloomberg calculations.

Kim allegedly texted Shoukat in April 2023, “Get ready, bro,” shortly after learning that Immunogen was in talks with AbbVie. “S—— about to explode.”

“Shoukat and his collaborators benefited greatly from their years-long scheme and cheated the system to collect their rewards,” Stefanie Roddy, the Federal Bureau of Investigation’s special agent in charge of Newark, New Jersey, said in a statement last month when the allegations against them began to emerge.

Lawyers listed for Kim did not respond to messages seeking comment, and neither did former New Jersey Gov. Chris Christie, an attorney for the Shoukats.

“We have zero tolerance for behavior that does not meet our standards,” a spokesperson for Lazard said in an emailed statement. “The allegations against this junior banker, who has not been with the firm since 2023, are clearly criminal and a clear violation of our policies; we are fully cooperating with the authorities.”

Prosecutors filed definitive charges against the Shoukat brothers and two other defendants in July, but it wasn’t until late November that U.S. authorities in New Jersey charged Kim. He was arrested days later in San Francisco. He later posted $100,000 bail and has yet to enter a plea.

Although the complaints against Kim do not specify where he was working at the time, brokerage industry employment records show he was at Lazard. The firm was acting as a consultant on the deals mentioned in the complaints, according to data compiled by Bloomberg. Kim left the healthcare team in San Francisco and joined Citigroup Inc. in the second half of 2023. Industry records show his employment there recently ended.

“Mr. Kim is no longer with Citi, and we understand that the conduct charged in the complaint relates to activity at a previous employer of Mr. Kim, not Citi,” a spokesperson for the New York-based bank said in an emailed statement.

While a junior member of Kim’s team, he had access to some of the industry’s biggest deals. Data compiled by Bloomberg show Lazard advised clients on at least 17 healthcare transactions valued at more than $1 billion during the 2020-2023 period when the insider trading ring was allegedly active. Authorities accused the group of targeting nearly half of its assets, including Biogen Inc.’s $7.3 billion acquisition of Reata Pharmaceuticals Inc. and Nestle SA’s $2.6 billion acquisition of Aimmune Therapeutics Inc.

The SEC alleged that Kim worked directly on some deals and was also able to gather information through virtual data rooms and internal communications platforms at Lazard. According to the Observer, he worked with his manager on documents vital to the transaction, including “engagement letters, investment letters, and confidential disclosure agreements.” He frequently communicated with his friend through encrypted messaging apps, prosecutors said.

Lazard also advised an unidentified client seeking to acquire Global Blood Therapeutics Inc., which is working on a sickle cell disease treatment, in 2022. Kim worked on a “detailed financial analysis” of the target company in April, and the Shoukat group began collecting stock bets the following month, according to U.S. complaints.

Lazard’s client made a $55-per-share offer for GBT in June, but a bidding war ensued, resulting in Pfizer Inc. He prevailed. Still, Kim’s tips enabled Shoukat’s group to reap $20 million in trading profits, according to charging documents.

Prosecutors did not identify Lazard’s client. Bloomberg reported that Johnson & Johnson made an offer of $55 per share during the same period.

Insider trading was just one of the schemes allegedly spearheaded by Shoukat, who previously met Kim when they interned together at Citigroup in 2018.

According to the Department of Justice and the SEC, Shoukat and her siblings were affiliated with Olema Pharmaceuticals Inc., a San Francisco-based company that was working on a drug for breast cancer types. He impersonated doctors while seeking confidential information about clinical trials conducted by They also hijacked the accounts of users on breast cancer forums and posted false messages about the drug’s increased effectiveness, pushing up the company’s stock prices so they could sell off their assets to make a profit, authorities said.

The group also targeted shares of Opiant Pharmaceuticals Inc., a maker of addiction treatment drugs. Kim allegedly tipped off Shoukat in December 2021 that the company could be acquired by Indivior Plc. After the deal stalled, the group issued a fake press release to boost the Santa Monica-based company’s stock price and allow them to sell its shares at a profit, authorities said.

The SEC alleged that Shoukat’s group also tried to pressure executives at Opiant to release clinical data on one of the company’s drugs. In March 2022, one of the brothers, Muhammad Arham Shoukat, criticized the CEO on Twitter, saying, “Throw him out or jump on him and kick him – how hard is it to find his addict in Santa Monica?” according to the regulator’s complaint.

Indivior eventually agreed to acquire Opiant in November 2022 for approximately $145 million. Lazard advised the target company.

With help from David Voreacos and Chris Dolmetsch.

This article was generated from an automated news agency feed without modifications to the text.