Waksal Friends Implicated in ImClone Trading Scandal

The pair allegedly were tipped to a now-famous 2001 FDA decision on the cancer drug Erbitux.
By Matthew Goldstein ,

The

ImClone Systems

(IMCL)

insider-trading scandal just won't go away.

Just days after Martha Stewart's release from prison in related criminal prosecution, federal securities regulators charged two other friends of former ImClone CEO Samuel Waksal with insider trading in shares of the biotech company.

The

Securities and Exchange Commission

filed civil securities fraud charges against Zvi Fuks and Sabina Ben-Yehuda for selling shares of ImClone in December 2001. Fuks and Ben-Yehuda allegedly got a tip from Waksal that an application for the company's colon cancer drug, Erbitux, would run into trouble with the Food and Drug Administration.

When ImClone finally disclosed the negative FDA news to the public, the stock dropped 16% in value. (Erbitux was eventually approved.)

Waksal is currently serving a six-year prison sentence for his role in the trading abuses.

The SEC said Fuks sold his shares for $5 million. Ben-Yehuda's sale generated a gross profit of $73,453.

Stewart, the domestic diva and founder of

Martha Stewart Living

(MSO)

, was convicted last March of lying to securities regulators about her well-timed December 2001 sale of about 4,000 shares of ImClone. She was convicted on all four counts in the obstruction of justice case and sentenced to five months in prison and five months home confinement.

Last Friday, Stewart was released from prison and began serving the home confinement portion of her sentence at her Bedford, N.Y., mansion.

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