Risk & Compliance

Ex-Merck Analyst Hit with Insider Trading Rap

He allegedly helped a friend make more than $700,000 on insider M&A info.
Matthew HellerOctober 15, 2014
Ex-Merck Analyst Hit with Insider Trading Rap

A former Merck financial analyst who prosecutors say had access to confidential information about planned acquisitions has been charged with taking part in an insider trading scheme that allegedly enabled a friend to make about $722,000 in illicit profits.

U.S. attorney Preet Bharara

U.S. Attorney Preet Bharara

Zachary Zwerko, 32, is facing both criminal charges filed by the U.S. Attorney of New York and a civil lawsuit brought by the U.S. Securities and Exchange Commission. He was arrested last week in Cambridge, Mass.

Zwerko “was a spy in the camp of his own company who passed secret merger and acquisition information to his co-conspirator so that lucrative illegal trades could be made,” U.S. Attorney Preet Bharara said in a news release.

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The information allegedly related to Merck’s $3.8 billion takeover in June of Idenix Pharmaceuticals and its negotiations with Ardea Biosciences about a possible merger. Ardea was later acquired by AstraZeneca in April 2012 for about $1.2 billion.

Authorities identified Zwerko only as a former analyst in the financial evaluation and analysis group of a pharmaceutical company that operates in New Jersey, but a spokeswoman for Merck told the Wall Street Journal he had been employed there.

According to the SEC’s complaint, Zwerko met the unidentified co-conspirator when they were business-school classmates. Starting in February 2012, the SEC says, he provided his friend with confidential information about Merck’s talks with Ardea that the friend used to trade in advance of the announcement of AstraZeneca’s takeover.

Zwerko also had “timely communications” with the trader after accessing Merck’s confidential information about the pending Idenix deal, the government alleges. Between May 21 and June 6, the trader allegedly spent more than $219,000 in Idenix shares. After the Idenix acquisition was announced, he sold them for a profit of about $579,000, the SEC said.

“Zwerko’s employer entrusted him with confidential information about possible acquisitions, and he was brazen enough to steal that information for his own benefit,” Sanjay Wadhwa, senior associate director of the SEC’s New York regional office, said in a statement.

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