Federal grand jury indicts Connecticut cardiologist for securities fraud

Edward Kosinski, MD, a cardiologist from Connecticut, was indicted and charged with two counts of securities fraud on August 4 for alleged insider trading.

Kosinski, 68, pleaded not guilty and was released on a $500,000 bond. He faces a maximum prison term of 20 years.

The Securities and Exchange Commission also filed civil charges against Kosinski.

The indictment from a federal grand jury in New Haven, Connecticut, said that Kosinski was the principal investigator for a clinical trial involving Regado Biosciences starting on Jan. 29, 2014. Five months later, Kosinski and other principal investigators received an email saying patients in the trial had had allergic reactions, that the trial would not accept any new patients and that the data and safety monitoring board would review the situation.

The next day, Kosinski allegedly sold 40,000 shares of Regado’s common stock for between $6.59 and $7.00 per share, two days before the company publicly announced the news on the unplanned review and temporary stop in patient enrollment. The SEC said the trial involved an investigational drug known as REG-1, which was being tested for regulating clotting in patients undergoing coronary angioplasty.

Kosinski allegedly avoided a loss of approximately $160,000 by selling his shares before the information was publicly released.

The indictment also alleged that Kosinski and other principal investigators received an email on July 29, 2014 saying a patient had died and that the trail was being placed on hold. Two days later, Kosinski allegedly purchased 50 shares of Regado’s common stock put option contracts with a strike price of $2.50. The next month, after Regado announced it would permanently halt the trial, Kosinski purchased 5,000 shares for $1.13 per share, exercised his put options and netted more than $3,000.

“We allege that Dr. Kosinski illegally sold all of his stock in the company to avoid thousands of dollars in losses when the bad news came out,” Joseph Sansone, co-chief of the SEC enforcement division’s market abuse unit, said in a news release. “Not content with avoiding heavy losses, Kosinski allegedly further enriched himself by placing options trades to profit when the company’s stock price dropped again on more bad news.”