Throw a dart to pick which way you're going to go on a binary stock event, and you'll be right 50% of the time. But look at the Food and Drug Administration's private documents server, and you can increase your win percentage substantially -- to the tune of $3.6 million.
Of course, that would be highly illegal, as Cheng Yi Liang found out yesterday when the Securities and Exchange Commission charged him and his son with insider trading, among other allegations.
Liang works -- or more likely, worked, since I imagine he's since been fired -- as a chemist for the FDA. After gaining access to information about whether the FDA would approve a drug or not, Liang is accused of buying or shorting stocks 27 different times. In some cases, like Momenta Pharmaceuticals
The biggest gains come when investors can correctly predict a decision that everyone else doesn't think will happen. Not surprisingly, Liang's biggest gains reportedly came from Vanda Pharmaceuticals'
The SEC claims that Liang didn't always get his initial bet right. He reportedly initiated long positions in POZEN
I'm a little surprised that Dendreon
Clearly, trading on inside information isn't fair to individual investors. Liang has allegedly been profiting from such practices since 2006. We can only hope the FDA institutes procedures that make it easier to catch these kinds of acts.