A significant insider trading scheme has come to light, implicating Justin Kim, a former dealmaker at Lazard Ltd., one of Wall Street’s prominent investment banks. US authorities accuse Kim of providing confidential tips on health-care deals to a network led by his friend, Muhammad Saad Shoukat, which allegedly generated a staggering $41 million in illicit profits. Kim is currently facing both criminal and regulatory charges, including fraud and insider trading, which could lead to up to 25 years in prison. The US Securities and Exchange Commission (SEC) is seeking to ban him from the financial industry.

According to complaints from the SEC, Kim allegedly leaked information on 10 potential takeovers over several years through 2023. In return for his tips, he reportedly received a Rolex watch and career advice. He met Shoukat during an internship at Citigroup in 2018. The information Kim provided was then allegedly used by Shoukat, his two brothers, and other co-conspirators to place well-timed bets ahead of major corporate takeovers. Kim, though a junior member of his team at Lazard, had access to some of the industry's most significant transactions, working directly on some deals and gleaning information from virtual data rooms and internal communications platforms. Prosecutors state he often communicated with Shoukat via encrypted messaging apps.

The alleged scheme involved deals totaling more than $60 billion in value, as calculated by Bloomberg. Among the specific acquisitions cited were Gilead Sciences Inc.’s $21 billion acquisition of Immunomedics Inc. in 2020, CVS Health Corp.’s $10.6 billion buyout of Oak Street Health Inc., and AbbVie Inc.’s $10.1 billion purchase of ImmunoGen Inc. in 2023. These three represent some of the largest health-care transactions Lazard advised on in the past decade. Kim’s alleged direct involvement was highlighted by a text to Shoukat in April 2023 regarding ImmunoGen talks: "Get ready bro," followed by "S--- is about to pop off." Other targeted deals included Biogen Inc.’s $7.3 billion purchase of Reata Pharmaceuticals Inc. and Nestle SA’s $2.6 billion takeover of Aimmune Therapeutics Inc.

One particularly lucrative instance involved the acquisition of Global Blood Therapeutics Inc. (GBT) in 2022. Lazard advised an unidentified client—reportedly Johnson & Johnson—on a potential acquisition. Kim allegedly worked on a detailed financial analysis of GBT in April 2022, and the Shoukat group began amassing stock bets the following month. Although Pfizer Inc. ultimately acquired GBT in a bidding war, Kim's tips enabled Shoukat’s group to reap $20 million in trading profits from this single transaction.

While Lazard itself is not accused of wrongdoing, the revelations come at a time when CEO Peter Orszag is actively working to expand the firm’s health-care franchise amidst a global upswing in mergers and acquisitions. A spokesperson for Lazard stated, "We have zero tolerance for conduct that does not adhere to our standards. The allegations against this junior banker, who has not been employed by the firm since 2023, are brazenly criminal and a clear violation of our policies, and we are fully cooperating with authorities."

Justin Kim's professional trajectory and legal troubles unfolded rapidly. After leaving Lazard’s health-care team in San Francisco in the latter half of 2023, he joined Citigroup Inc., though industry records indicate his employment there recently ended. A spokesperson for Citigroup confirmed, "Mr. Kim is no longer with Citi, and we understand that the conduct charged in the complaint pertains to activity at a prior employer of Mr. Kim and not Citi." Prosecutors filed sealed charges against the Shoukat brothers and two other defendants in July, but Kim was not charged by US authorities in New Jersey until late November, leading to his arrest in San Francisco days later. He subsequently posted $100,000 bail and has not yet entered a plea.

The insider trading scheme was reportedly just one component of broader alleged criminal activities orchestrated by Muhammad Saad Shoukat and his network. The Justice Department and SEC also accuse Shoukat and his brothers of impersonating physicians to obtain confidential information about clinical trials conducted by Olema Pharmaceuticals Inc., a company developing a breast cancer drug. Furthermore, they allegedly hijacked user accounts on breast-cancer forums to post false messages exaggerating the drug's efficacy, aiming to inflate the firm's stock price before dumping their holdings for profit.

Another target of Shoukat’s group was Opiant Pharmaceuticals Inc., a maker of addiction-treatment drugs. Kim allegedly tipped off Shoukat in December 2021 about a likely acquisition by Indivior Plc. When this deal stalled, the group reportedly published a fake press release to boost Opiant's share price, again allowing them to sell stock for profit. The SEC also alleged attempts by Shoukat’s group to pressure Opiant executives into releasing clinical data. In March 2022, one of Shoukat’s brothers, Muhammad Arham Shoukat, reportedly posted a threatening message on Twitter targeting Opiant’s CEO. Indivior eventually acquired Opiant for approximately $145 million in November 2022, with Lazard advising the target company.

The detailed allegations, ranging from sophisticated insider trading to brazen market manipulation and impersonation, highlight a multifaceted criminal enterprise. Authorities, including the FBI's special agent in charge in Newark, New Jersey, Stefanie Roddy, emphasized that Shoukat and his co-conspirators "benefited greatly from their years-long scheme, and cheated the system to reap their rewards." The ongoing legal proceedings against Justin Kim and the Shoukat network underscore the vigilance of US authorities against financial misconduct.