The U.S. Securities and Exchange Commission (SEC) filed fraud charges against Matthew Groom, a resident of North Carolina and self-employed Managing Director of TechNet UC, a private information technology consulting company that he co-founded, for illegal insider trading in the securities of Spero Therapeutics Inc., a Delaware corporation based in Cambridge, Massachusetts, focused on the development of treatments for rare diseases and diseases caused by multi-drug resistant bacterial infections.
The SEC’s enforcement complaint, filed in the U.S. District Court for the District of Massachusetts, charges Groom with violating the anti-fraud provisions of the federal securities laws, to wit: Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder.
According to the SEC’s court allegations, Groom contracted to work as an information technology (“IT”) consultant to Spero and, in that capacity, he was subject to a confidentiality agreement with the Company. Spero announced that it had filed a New Drug Application (“NDA”) with the FDA for Tebipenem, a drug intended to treat complicated urinary tract infections. If the FDA rejected the Tebipenem NDA or substantially delayed approval, Spero risked not having sufficient funds to continue its commercialization efforts. At the mid-point of the FDA’s review cycle, the FDA notified Spero that the Phase 3 study on which its NDA was based had failed to demonstrate the required efficacy endpoint in the relevant study population.
Spero began contingency planning for FDA disapproval. As part of this planning, Spero’s Chief Legal Officer directed the Spero IT Head, who was a longtime acquaintance of Groom, to review the Company’s service contracts with third-party vendors for the purpose of identifying cost reductions. In a virtual call, the Spero IT Head alerted Groom to material nonpublic information about Spero’s contingency planning for a possible workforce reduction. Later the same day, Groom placed an order to sell all his Spero shares. When Spero publicly announced that it was suspending commercialization efforts, its stock price dropped 64%, resulting in Groom avoiding a loss of about $12,936.86.
Without admitting or denying the allegations, Groom consented to a judgment permanently enjoining him from future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; ordering him to pay disgorgement of $12,936.86, prejudgment interest of $2,376.22, and a civil penalty of $12,936.86; and imposing a five-year officer-and-director bar. The settlement is subject to court approval.
Help from an SEC Investigation Lawyer
Insider trading lawyer David Chase, Esq. of the Law Firm of David R. Chase, has represented those under SEC investigation for over twenty-five years after having served as Senior Counsel in the SEC’s Enforcement Division. If you have received a SEC Subpoena and need strategic advice from an experienced SEC defense attorney, contact David at: 800-760-0912 or e-mail him at: david@davidchaselaw.com. Visit the Firm’s website for valuable content and to review the firm’s prior successful SEC defense results at: www.securitiesfrauddefense.net. Representation is nationwide.
