Two Carlsbad residents, friends since childhood, were slapped this week for insider trading that arose after they attended a concert together. According to the Securities and Exchange Commission, in July of 2016, Robert Lozuk, then a senior vice president of deeply troubled biotech Sequenom, tipped off a friend, John Kollus, that Sequenom was about to be purchased.
Separately, they bought stock in advance, knowing that the purchase was illegal, according to the Securities and Exchange Commission. The stock soared 176 percent after the purchase of Sequenom was announced, and each reaped profits of $26,643.80. But they got caught, and this week the securities commission issued punishments. Both must cough up their $26,643.80 ill-gotten gains, among other penalties.
When it was a standalone company, Sequenom was the very picture of frauds often pulled by newly-public companies, particularly biotechs. It went public on February 1, 2000, a month before the tech/biotech crash. The opening price of its stock was $26 and it closed the first day at $79.25. The company had no revenue but, supposedly, lots of promise in gene technology. Sequenom stock zoomed to $138, but by yearend 2002, after the tech bubble had burst, it was selling below $1.
By 2009, the stock had gotten back to $25, propelled by excitement about a possible noninvasive prenatal test for Down symdrome. Suddenly, the company announced that investors should no longer rely on previously announced test data. The securities commission charged that the company’s research chief, Elizabeth Dragon, had lied at least three times when she said the Down syndrome test was almost 100 percent accurate. She pleaded guilty to criminal charges and in 2011 died of natural causes, according to her lawyer.
In both 2010 and 2011, two people connected with the company were charged with insider trading in the stock.