Guilty Plea to Insider Trading in Seattle Genetics Stock
Brother of Former Employee with Advanced Knowledge of Clinical Trial Results Profited from Illegal Trades

ZISHEN FAN, 38, of Chino Hills, California, pleaded guilty today in U.S. District Court in Seattle to securities fraud. FAN was arrested in April 2011, after being charged with insider trading of Seattle Genetics stock. FAN’s brother, Zizhong Fan, a.k.a. “James,” of Mill Creek, Washington, is now deceased. James Fan was manager of clinical programming at Seattle Genetics in 2010, during a time when the company was preparing non-public information about its drug being developed to treat Hodgkin’s lymphoma. In the plea agreement, ZISHEN FAN admits his brother James Fan provided him with material, non-public information so that he could purchase stock options and stock in Seattle Genetics before word of the successful clinical trials drove up the stock price. The brothers allegedly made in excess of $700,000 through their trading with non-public information. ZISHEN FAN faces up to 20 years in prison when sentenced by U.S. District Judge Richard A. Jones on October 7, 2011.

Records filed in the case reveal that during a time period when employees of Seattle Genetics were prohibited from purchasing stock in the company, the FAN brothers purchased more than half-a-million-dollars worth of stock or stock options in Seattle Genetics. The men used a brokerage account in the name of their father, but bank and Internet records indicate that money used for the investments came from the brothers, and the trades were executed by ZISHEN FAN. After Seattle Genetics announced the successful outcome of their clinical trial on September 27, 2010, FAN began to sell and exercise the options and stocks for a substantial profit.

The suspicious volume and trading patterns in the account resulted in an alert to the Securities and Exchange Commission (SEC). In January 2011, the SEC contacted separately the two Fan brothers who denied knowing each other. After the SEC contacts, the Fan brothers attempted to move some of their profit to a bank in China. The SEC has filed suit against ZISHEN FAN and frozen the remaining assets in the father’s brokerage account.

The case was investigated by the FBI. The case is being prosecuted by Assistant United States Attorney Katheryn Kim Frierson.

For additional information please contact Emily Langlie, Public Affairs Officer for the United States Attorney’s Office, at (206) 553-4110 or Emily.Langlie@USDOJ.Gov.