Trading in the Shadows: The SEC’s Case Against Matthew Panuwat

Panuwat was employed by Medivation as a senior business development executive and had access to highly confidential information relating to the company’s potential acquisition by Pfizer. The SEC alleged that, rather than trading Medivation stock, Panuwat used that confidential information to purchase call options in Incyte, a separate public company operating in a similar biopharmaceutical space.

The alleged trading pattern was relatively simple:

• 18 August 2016: Panuwat received confidential information from Medivation’s CEO indicating that Pfizer’s acquisition of Medivation was close to being announced.

• Within minutes of receiving that information: Panuwat purchased short-term, out-of-the-money call options in Incyte from his work computer

• 22 August 2016: Pfizer’s acquisition of Medivation was publicly announced. Medivation’s share price rose materially and Incyte’s share price increased by approximately 8%. This caused the value of Panuwat’s Incyte options to roughly double.

• 24 August 2016: Panuwat reportedly sold 300 of the Incyte call options for a profit.

• September 2016: Panuwat reportedly sold the remainder of the Incyte call options.

The SEC alleged that Panuwat understood that a premium acquisition of Medivation could have a positive read-across impact on Incyte’s share price. By trading ahead of the announcement, the SEC alleged that Panuwat generated illicit profits of $107,066.

The public SEC materials do not state exactly how Panuwat’s trading was first identified. What is clear, however, is that once the trade was examined, the pattern was highly suspicious: a senior Medivation business development executive received confidential information about an imminent Pfizer acquisition and, within minutes, used his work computer to purchase short-dated, out-of-the-money call options in Incyte, a comparable biopharmaceutical company.

The SEC filed its complaint against Panuwat in August 2021 in the U.S. District Court for the Northern District of California. The regulator alleged that Panuwat had engaged in insider trading in violation of the federal securities laws by using confidential information about Pfizer’s impending acquisition of Medivation to trade ahead of the announcement.

Panuwat challenged the case before trial. On 14 January 2022, the court denied his motion to dismiss and later, on 20 November 2023, the court also denied his motion for summary judgment, meaning the case was allowed to proceed to a jury trial.

The trial began in San Francisco on 25 March 2024, and after 8 days the jury found Panuwat liable for insider trading. The SEC described the verdict as confirming that Panuwat had used highly confidential information about Medivation’s acquisition by Pfizer to trade ahead of the news for his own enrichment.

Following the verdict, SEC Enforcement Director Gurbir S. Grewal stated that, there was “nothing novel” about the case and that it was “insider trading, pure and simple.” This is an interesting framing, because while the underlying principle may be familiar, do not misuse confidential information for personal gain, the trading behaviour itself is not the usual insider dealing pattern that many surveillance controls are designed to detect.

In September 2024, the court upheld the jury verdict and imposed the maximum civil penalty of $321,197.40. However, the court declined to impose an officer and director bar, noting that while the conduct was serious, it did not justify permanently damaging his career in that way.

• Shadow trading exposes a blind spot in traditional insider dealing surveillance.
  Most insider dealing controls are designed around direct issuer relationships: an employee trades their own company, a banker trades the target, or a connected person trades ahead of an announcement. Panuwat did not trade Medivation or Pfizer. He traded Incyte, a comparable company whose share price the SEC alleged was likely to benefit from the Medivation acquisition announcement. That makes the case a useful reminder that surveillance focused only on the company directly connected to the MNPI may miss the wider trade idea.

• Firms need to think harder about economically linked securities.
  The key surveillance question is not simply “did someone trade the issuer connected to the confidential information?” but “did someone trade a security that could reasonably move because of that information?” In sectors such as biotech, banking, energy, commodities, mining or semiconductors, a major acquisition, earnings shock, regulatory approval or supply event can affect an entire peer group. That means restricted lists and watchlists may need to consider competitors, close comparables, suppliers, customers and sector peers, not just the named issuer.

• Options trading deserves particular attention in insider dealing scenarios.
  Panuwat purchased short-term, out-of-the-money call options in Incyte. Options can provide leveraged exposure to a short-term price move and may therefore be attractive to someone seeking to profit quickly from MNPI. Surveillance teams should pay close attention to unusual options activity, especially where the trader has access to sensitive corporate information but the option position is in a related, rather than directly restricted, name.

• Employee role matters as much as employee title.
  Panuwat’s role in business development was important because he was involved in tracking industry developments and acquisition opportunities, and he had access to confidential information relating to Medivation’s sale process. For surveillance teams, this suggests that enhanced monitoring should not only focus on senior executives or named insiders. Employees in corporate development, strategy, legal, finance, investor relations, M&A, technology and treasury roles may also have access to information that can be misused in less obvious ways.