Former Lazard Banker Faces Insider Trading Charges Over Healthcare Deals
US authorities have brought serious charges against a former dealmaker from Lazard Ltd., one of Wall Street's most prominent investment banks. Justin Kim, who worked at Lazard, is accused of feeding confidential tips about healthcare mergers and acquisitions to a friend's network of insider traders. This group allegedly generated a staggering $41 million in illicit profits through well-timed stock bets.
Criminal and Regulatory Actions
The US Securities and Exchange Commission has filed a complaint against Kim, seeking to ban him from the financial industry permanently. In a separate move last month, the Department of Justice unveiled criminal fraud and insider trading charges that could carry a prison sentence of up to 25 years.
According to the SEC complaint, Kim received a Rolex watch and career advice in exchange for leaking information about ten potential corporate takeovers over several years, continuing through 2023.
The Trading Network and Major Deals
Kim's friend, Muhammad Saad Shoukat, along with two of his brothers and other defendants, allegedly used the inside information to place bets ahead of major healthcare acquisitions. The deals involved some of the largest transactions Lazard worked on in the healthcare sector over the past decade.
- Gilead Sciences Inc.'s $21 billion acquisition of Immunomedics Inc. in 2020
- CVS Health Corp.'s $10.6 billion buyout of Oak Street Health Inc.
- AbbVie Inc.'s $10.1 billion purchase of ImmunoGen Inc. in 2023
Bloomberg calculations indicate that illegal tips allegedly preceded deals totaling more than $60 billion in value.
Encrypted Messages and Arrest
Prosecutors say Kim often communicated with Shoukat using encrypted messaging apps. In one alleged text from April 2023, shortly after learning about ImmunoGen's talks with AbbVie, Kim reportedly wrote: "Get ready bro. S—— is about to pop off."
US authorities in New Jersey charged Kim in late November. He was arrested days later in San Francisco, posted $100,000 bail, and has yet to enter a plea.
Lazard's Position and Cooperation
While Lazard itself faces no accusations of wrongdoing, the scheme emerges as CEO Peter Orszag seeks to build up the firm's healthcare franchise amid increasing global merger activity.
A Lazard spokesperson stated: "We have zero tolerance for conduct that does not adhere to our standards. The allegations against this junior banker, who has not been employed by the firm since 2023, are brazenly criminal and a clear violation of our policies, and we are fully cooperating with authorities."
Kim's Career Moves
Brokerage records show Kim worked at Lazard during the period in question. The firm served as an adviser on the deals cited in the complaints. In the latter half of 2023, Kim left Lazard's healthcare team in San Francisco and joined Citigroup Inc. Industry records indicate his employment at Citi recently ended.
A Citigroup spokesperson said: "Mr. Kim is no longer with Citi, and we understand that the conduct charged in the complaint pertains to activity at a prior employer of Mr. Kim and not Citi."
Access to Major Transactions
Although Kim was a junior team member, he had access to some of the healthcare industry's biggest deals. Data compiled by Bloomberg shows Lazard advised clients on at least 17 healthcare transactions worth over $1 billion each during the 2020-2023 period when the insider-trading ring was allegedly active.
Authorities accuse the group of targeting almost half of these deals, including trading around Biogen Inc.'s $7.3 billion purchase of Reata Pharmaceuticals Inc. and Nestle SA's $2.6 billion takeover of Aimmune Therapeutics Inc.
Working Methods and Additional Schemes
The SEC alleges Kim worked directly on some deals and could also gather information through Lazard's virtual data rooms and internal communications platforms. He collaborated with his manager on vital transaction documents including engagement letters, investment letters, and confidential disclosure agreements.
Insider trading was just one of several alleged schemes led by Shoukat, who met Kim when both interned together at Citigroup in 2018.
According to the Justice Department and SEC, Shoukat and his brothers impersonated physicians to obtain confidential information about clinical trials conducted by Olema Pharmaceuticals Inc. They also hijacked accounts on breast-cancer forums, posting false messages about a drug's increased efficacy to inflate the company's stock price before selling their holdings for profit.
Additional Targets and Pressure Tactics
The group also targeted Opiant Pharmaceuticals Inc., a maker of addiction-treatment drugs. Kim allegedly tipped off Shoukat in December 2021 that the company was likely to be bought by Indivior Plc. When the deal stalled, the group published a fake press release to boost the company's share price, allowing them to sell stock at a profit.
The SEC further alleges Shoukat's group tried to pressure Opiant executives into releasing clinical data on one of the company's drugs. In March 2022, one brother, Muhammad Arham Shoukat, criticized the CEO on Twitter with threatening language, according to the regulator's complaint.
Indivior eventually agreed to buy Opiant for about $145 million in November 2022, with Lazard advising the target company.
Law Enforcement Response
Stefanie Roddy, the FBI's special agent in charge in Newark, New Jersey, stated: "Shoukat and his co-conspirators benefited greatly from their years-long scheme, and cheated the system to reap their rewards."
Attorneys listed for Kim did not respond to messages seeking comment, nor did former New Jersey Governor Chris Christie, who serves as an attorney for the Shoukats.
Prosecutors initially filed sealed charges against the Shoukat brothers and two other defendants in July, with Kim's charges following months later.
