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Ben Estes focuses on representing clients in complex civil litigation as well as government and internal investigations.

On November 20, 2023, a federal district court in the Northern District of California declined to grant summary judgment to the defendant in SEC v. Panuwat, the first-ever enforcement action by the U.S. Securities and Exchange Commission (the “SEC”) based on the novel insider trading theory of “shadow trading”—the use of one company’s inside information to trade in securities of another, similarly situated, but unrelated company.  The court previously declined to dismiss the case, signaling a potential expansion of insider trading enforcement.  The court’s summary judgment decision provides further guidance as to what may constitute impermissible shadow trading ahead of a trial scheduled for March 2024.

The case centers on Pfizer’s acquisition of Medivation, an oncology-focused biopharmaceutical company.  The defendant, Matthew Panuwat, worked at Medivation and allegedly learned the acquisition was imminent when Medivation’s CEO emailed Panuwat and other employees about the status of the sale process.  Seven minutes later, Panuwat purchased call options in another oncology-focused biopharmaceutical company, Incyte, which he later sold for a profit.  In its January 2022 decision denying Panuwat’s motion to dismiss, the court held that the SEC had adequately pleaded each of the required elements under the well-established “misappropriation theory” of insider trading: materiality, breach of duty, and scienter.  In its recent summary judgment decision, the court held that the SEC had shown genuine disputes of material fact concerning each of those elements and elaborated on materiality and breach of duty for purposes of the shadow trading theory.Continue Reading Shadow Trading: With Trial Looming in SEC v. Panuwat, the SEC’s Latest Insider Trading Theory Takes Further Shape