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United States v. Kosinski

United States District Court, D. Connecticut

August 16, 2017

UNITED STATES OF AMERICA
v.
EDWARD KOSINSKI

          MEMORANDUM OF DECISION DENYING DEFENDANT'S MOTION TO DISMISS THE INDICTMENT

          VANESSA L. BRYANT, U.S.D.J.

         Before the Court is Defendant's Motion to Dismiss the Indictment for failure to state an offense under Federal Rule of Criminal Procedure 12(b)(3). For the reasons that follow, the Defendant's Motion is DENIED.

         I. Background

         On August 3, 2016, a federal grand jury sitting in New Haven, Connecticut returned an indictment against Defendant Edward Kosinski charging him with two counts of Insider Trading in violation of 17 C.F.R. Section 240.10b-5 and 15 U.S.C. Sections 78j(b) and 78ff. [Dkt. 1 (Indictment).] The Indictment alleges as follows.

         Throughout the relevant time period, Defendant was a resident of Weston, Connecticut and the president of President of Connecticut Clinical Research, LLC (“CCR”), located in Bridgeport, Connecticut. Indictment at ¶ 1. Regado Biosciences, Inc. (“Regado”) is a publicly traded biopharmaceutical company incorporated in Delaware and principally located in New Jersey. Id. at ¶ 2. From approximately September 2013 through June 2014, Regado enrolled patients in a clinical trial to study the efficacy of a clinical drug candidate (the “Trial”). Id. at ¶ 3. Regado hired the Cleveland Clinical Coordinating Center for Clinical Research (“C5 Research”) to coordinate and manage the Trial. Id.

         On or about June 12, 2013, Defendant, on behalf of CCR, entered into a Confidential Disclosure Agreement (the “Disclosure Agreement”) with Regado. The Disclosure Agreement granted CCR the right to receive confidential, proprietary information to “evaluate CCR's interest in participating in the Trial, ” and required CCR to “treat the information received confidentially and not disclose such information” without Regado's prior written consent. Id. at ¶ 4.

         On or about January 29, 2014, Defendant entered into a Clinical Study and Research Agreement (the “Research Agreement”) with C5 Research, an authorized agent of Regado. Id. at ¶ 5. Defendant executed the Research Agreement both individually, as a principal investigator, and on behalf of CCR. Id. The Research Agreement required CCR and Defendant to “maintain in strict confidence all confidential information . . . provided by C5 Research or Regado during the course of the Trial.” Id.

         Between approximately October 2013 and May 2014, Defendant purchased 40, 000 shares of Regado common stock. Id. at ¶ 6. On or about June 29, 2014, C5 Research informed Trial investigators and coordinators, including Defendant, that several Trial participants had allergic reactions to the clinical drug candidate. Id. at ¶ 8. As a result, C5 Research indicated it would accept no new Trial participants until July 2, 2014 and the Data and Safety Monitoring Board would assess the Trial. Id. This information was confidential, non-public and material. Id.

         On or about the following day, June 30, 2014, Defendant sold his $40, 000 shares of Regado common stock for between $6.59 and $7.00 per share, for a total of approximately $272, 561. Id. at ¶ 9. He did so knowingly, willfully, with intent to defraud, and in violation of a duty of trust and confidence owed to Regado and C5 Research. Id.

         On July 2, 2014, the closing price of Regado common stock was $6.76. Id. at ¶ 10. After the stock market closed that day, Regado publicly announced that participant enrollment in the Trial was paused pending the Data and Safety Monitoring Board's assessment. Id. at ¶ 10. On July 3, 2014, the closing price of Regado common stock was $2.81. Id. at ¶ 11. By selling his stock before July 2, 2014, Defendant avoided a loss of approximately $160, 000. Id.

         On July 29, 2014, C5 Research informed Defendant and other investigators and study coordinators that a Trial participant had died and the Trial was on hold pending the Data and Safety Monitoring Board's assessment. Id. at ¶ 14. The information was confidential, non-public, and material. Id.

         Approximately two days later, on or about July 31, 2014, Defendant purchased 50 Regado put-option contracts with a strike price of $2.50 and an expiration date of October 18, 2014. Id. at ¶ 15. This gave Defendant the right to sell 5, 000 shares of Regado common stock on or before October 18, 2014 for $2.50 per share. Id. He did so knowingly, willfully, with intent to defraud, and in violation of a duty of trust and confidence owed to Regado and C5 Research. Id. The closing price of Regado common stock that day was $2.98. Id. at ¶ 16.

         On or about August 25, 2014, Regado publicly announced that it had permanently halted the Trial. Id. at ¶ 17. Over the course of that day, Regado common stock prices fell to $1.13 per share. Id. Approximately three days later, on or about August 28, 2014, Defendant purchased 5, 000 shares of Regado common stock for approximately $1.13 per share. Id. at ¶ 18. Defendant then exercised his put option, selling his 5, 000 shares for $2.50 per share and netting a profit of over $3, 000. Id.

         Defendant self-surrendered and was arraigned on August 4, 2016. [Dkt. 4.] Defendant entered a $500, 000.00 non-surety bond and agreed to conditional pre-trial release. [Dkts. 5, 6.]

         II. Standard for ...


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