Community Corner

Ashburn Man Gets 42 Months for Insider Trading

Former NASDAQ managing director pleaded guilty to the crimes in May.

A U.S. District Court judge sentenced a former NASDAQ Stock Market managing director to 42 months in prison for insider trading on multiple occasions. Judge Anthony Trenga also ordered Donald Johnson, of Ashburn, to forfeit $755,000.

When Johnson, 57, of Ashburn, pleaded guilty in May, Assistant U.S. Attorney General Lanny A. Breuer called him “a fox in a hen house” for using highly sensitive information, to which he had access in his position at NASDAQ, to make stock purchases or sales.

“Insider trading is an insidious crime that threatens the integrity of our financial markets, especially when the illegal trades are made by a trusted securities exchange official,” said Neil H. McBride, the U.S. Attorney for the Eastern District of Virginia. “Mr. Johnson used his position at NASDAQ to make quick profits from sensitive information companies provided him. He learned what every other trader on Wall Street must now realize: We’re watching, and when you’re caught you’ll face serious time in prison.”

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Johnson served as the managing director at NASDAQ’s market intelligence desk in New York from August 2006 until September 2009. The information Johnson used, enabled him to buy or sell stock before publicly traded companies released positive or negative information.

“Armed with this insider information, Mr. Johnson made investing look easy. He pocketed hundreds of thousands of dollars,” Breuer said Aug. 12. “But he did it by exploiting his trusted position to gain an unfair – and illegal – advantage in the market.”

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In one example, Johnson learned that a United Therapeutics drug trial for Viveta, now called Tyvaso, has a on the positive test. Johnson purchased stock in UT and then, after the information became public, sold the stock for a profit, according the Statement of Facts related to the plea agreement. On that single transaction, Johnson gained $175,230.82. After Tyvaso was approved, but before the approval was announced, Johnson similarly used company information to purchase UT stock that he later sold for a $110,867.80 gain.

Johnson also benefited when companies prepared to announce bad news by participating in short sales, which essentially amount to bets against the company’s stock price.

In total, Johnson admitted that he illegally gained at least $641,157.65 during his time with NASDAQ. Besides United Therapeutics, Johnson profited off of stock transactions with the following companies: Central Garden and Pet Company, Digene Corporation, Idexx Laboratories Inc. and Pharmaceutical Product Development Inc.

After pleading guilty early this year, Johnson faced up to 20 years in prison and a fine of up to $5 million.


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