Sanjay Valvani helped Jacob Gottlieb build his Visium Asset Management into a hedge fund that at its peak managed $8 billion. Now he has put its future in doubt.
Valvani, 44, was accused on Wednesday of insider trading and reaping more than $32 million from trades in drug companies using secret tips, according to federal prosecutors. Valvani, a money manager and a top lieutenant of Gottlieb, was one of four people, including two former Visium employees, charged with securities fraud.
The allegations may end Gottlieb’s ambition of turning his New York-based firm into a diversified hedge-fund giant akin to Ken Griffin’s Citadel and Izzy Englander’s Millennium Management. Visium has been seeking to sell its multimanager platform and clients have asked to withdraw at least $2 billion this quarter after the government’s probe was disclosed, people familiar with the matter said.
While Gottlieb and Visium weren’t accused of wrongdoing, criminal charges against individual money managers have forced other hedge fund firms to close their doors in the past.
“These recent charges are very serious and at the very least raise concerns about compliance oversight at the firm and should result in a number of investors reevaluating whether they want to stay with the fund,” said Don Steinbrugge, managing partner of hedge-fund consulting firm Agecroft Partners in Richmond, Virginia.
Government’s Charges
Valvani is accused of trading on tips about drugs that were seeking generic status from the U.S. Food and Drug Administration, according to prosecutors. The government also charged former Visium money manager Christopher Plaford, 38, in the scheme, as well as in a separate case involving the mismarking of securities. In that case, former Visium employee Stefan Lumiere, 45, who was Gottlieb’s brother-in-law, was also charged.
Plaford has pleaded guilty and is cooperating with the government. Lawyers for Valvani and Lumiere said their clients are innocent.
Gottlieb said through a spokesman that he was “deeply saddened” by the events.
‘Hungry’ Manager