NEW YORK, NY – Sepehr Sarshar, 53, of Encinitas, California, is facing federal charges in Manhattan for allegedly running an insider trading scheme that raked in over $700,000 in illegal profits. The former CEO of Auspex Pharmaceuticals, Inc. is accused of leaking confidential information about an impending tender offer to his inner circle, allowing them to profit handsomely while the public remained in the dark.
Acting Manhattan U.S. Attorney Audrey Strauss didn’t mince words announcing the charges this morning. “As alleged, Sepehr Sarshar, aware of an impending tender offer for his company, tipped off friends and a close relative, enabling them to reap nearly three-quarters of a million dollars in illegal profits,” she stated. “My Office and the FBI remain resolute in our commitment to policing and prosecuting insider trading.”
The feds say Sarshar, while still at the helm of Auspex, misappropriated material nonpublic information about the planned takeover by Teva Pharmaceutical Industries Ltd. between January and March of 2015. Instead of keeping this information locked down, he allegedly shared it with a college friend, his girlfriend at the time, another long-time friend, and a family member – collectively dubbed the “Associates” in court documents. These individuals then traded on the information, pocketing the illicit gains.
FBI Assistant Director-in-Charge William F. Sweeney Jr. highlighted the brazen nature of the scheme. “It seems intuitive that material nonpublic information should never be shared with the public, or traded on, prior to shareholder knowledge,” Sweeney said. “Still, time and time again we see where those privy to a company’s inside information pass it on to family and friends… Upsetting the market balance in this way puts all investors at a disadvantage.”
But the alleged deception didn’t stop at the trades. According to the complaint unsealed in Manhattan federal court, Sarshar later lied to the Financial Industry Regulatory Authority (FINRA) during an investigation into the suspicious trading activity. He falsely claimed he had no contact with two of his “Associates” during the crucial period leading up to the tender offer, despite substantial communication – including discussions about the upcoming deal.
Sarshar is charged with one count of securities fraud, carrying a maximum sentence of 25 years in prison and a $250,000 fine (or twice the profit/loss). He also faces charges of wire fraud (20 years max, $250,000 fine) and fraud in connection with a tender offer (20 years max, $5 million fine). He is expected to be presented in federal court in San Diego today. The message, as the FBI made clear, is simple: insider trading is a high-risk gamble with potentially devastating consequences.
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Key Facts
- State: New York
- Agency: DOJ USAO
- Category: White Collar Crime
- Source: Official Source ↗
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