The chief information officer (CIO) at former pharmaceutical company Mylan was charged with insider trading for tipping off a former colleague about the firm’s impending merger with a division of Pfizer, among other matters.

Ramkumar Rayapureddy, who holds the same position at Mylan successor Viatris, tipped off his former colleague and friend Dayakar Mallu about the company’s financial results, an unannounced Food and Drug Administration (FDA) approval of a Mylan drug, and an upcoming merger with Pfizer, the Securities and Exchange Commission (SEC) alleged in its complaint filed Nov. 10 in U.S. District Court for the Western District of Pennsylvania. Rayapureddy is also facing criminal charges from the Department of Justice (DOJ).

From September 2017 through July 2019, Rayapureddy notified Mallu of the material nonpublic information, according to the complaint. Rayapureddy worked at Mylan since 2014 and was made CIO in January 2016, the SEC said.

On Sept. 29, 2017, Rayapureddy called Mallu and told him it would be announced soon the FDA had approved a Mylan drug.

“That same day, Mallu purchased 1,100 Mylan call option contracts in his brokerage account for $799,945,” the SEC alleged. On Oct. 4, 2017, the day after the drug approval was announced, Mylan’s share price soared from $5.27 per share to $37.80 per share, and Mallu’s contracts increased by $691,555, per the complaint.

Rayapureddy continued to feed insider information to Mallu, the SEC alleged. Mallu, who left Mylan in March 2017, used the intel to eventually gain nearly $8 million through trades of Mylan securities. He shared some of the gains with Rayapureddy in India through cash payments, the SEC said.

“As the officer of a public company, Rayapureddy had a duty to safeguard material nonpublic information concerning significant Mylan events, but, as our complaint alleges, he violated this duty by tipping his friend in exchange for cash kickbacks,” said Nicholas Grippo, regional director of the SEC’s Philadelphia office, in a press release.

Rayapureddy is charged with violating the Securities Exchange Act. The SEC is seeking an injunction, disgorgement, a penalty, and to bar Rayapureddy from sitting again as an officer or director.

Separately, Rayapureddy was charged by the DOJ with one count of conspiracy to commit securities fraud and three counts of securities fraud, the agency announced. If convicted, he will face up to 65 years in prison.

“We take the government’s allegations made … against Ramkumar Rayapureddy very seriously and will continue to review the matter in the same fashion,” a Viatris spokesperson said in an emailed statement. “The company is committed to the highest standards of integrity and compliance with the law. Ramkumar Rayapureddy is on a leave of absence from the company. We have and will continue to fully cooperate with the authorities, and we expect to have no further comment on this matter.”

In September 2021, Mallu pleaded guilty to conspiracy to commit securities fraud and aiding in preparation of a false tax return. He has been awaiting sentencing.