SEC v. Joseph C. Lewis; Carolyn W. Carter; Patrick J. O’Connor; Bryan L. Waugh; and Jean J. O’Connor, No. 1:23-cv-06438, Southern District of New York (July 26, 2023) — Complaint

UNI
TED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
U.
S. SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
JOSEPH C. LEWIS, CAROLYN W.
CARTER, PATRICK J. O’CONNOR, and
BRYAN L. WAUGH,
D
efendants,
and
JEAN J. O’CONNOR,
R
elief Defendant.
Case No. 1:23-cv-6438
J
ury Trial Demanded
COMPLAINT
Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against
Defendants Joseph C. Lewis (“Lewis”), Carolyn W. Carter (“Carter”), Patrick J. O’Connor
(“O’Connor”), and Bryan L. Waugh (“Waugh”) (collectively, the “Defendants”), and Jean J.
O’Connor (the “Relief Defendant”), alleges as follows:
SUMMARY
1.This insider trading case involves billionaire investor Lewis illegally tipping
material nonpublic information to his then girlfriend, Carter, and his longtime private pilots,
O’Connor and Waugh, so that each would use this information to execute trades.  All three of
Lewis’ tippees traded on the material nonpublic information obtained through Lewis’ breaches of
trust and confidence, and reaped combined profits of over $545,000.

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2.Lewis is the principal investor in, and chairman of, “Investment Group,” which
has investments in over 200 operating companies.  The Fund, which is a part of Investment
Group, invests in biotechnology companies.  As the president, director, and sole indirect owner
of the Fund’s manager, Lewis controlled and owed a duty of trust and confidence to the Fund.
3.From 2015 to the present, the Officer has served as a senior officer with the Fund.
As a senior officer, the Officer often learned about material nonpublic information from
biotechnology companies in which the Fund invested.  In light of Lewis’ role with the Fund and
his associated duty of trust and confidence, the Officer often entrusted this material nonpublic
information with Lewis.  Between approximately July and October 2019, Lewis breached his
duty by illegally tipping material nonpublic information that he had learned from the Officer to
Carter, O’Connor, and Waugh, who then traded on the basis of that information.
4.More specifically, in July 2019, the Officer informed Lewis that a company in
which the Fund had a substantial investment (“Issuer A”) would be raising capital through a
Private Investment in Public Equity (“PIPE”) offering.  A PIPE offering is a private placement of
securities of an already public company that is typically offered to a limited group of institutional
accredited investors.  This is a type of transaction that, in the biotechnology sector, frequently
results in an increase in share price.  Lewis, who was bound by a confidentiality agreement not to
share information about the transaction, tipped Carter this material nonpublic information when
they met in a luxury hotel room the same day Lewis learned the information.  Within three hours
of their meeting at the hotel, she bought over $700,000 worth of Issuer A’s common stock.  After
Issuer A announced its capital raise the next day, its share price increased by approximately
34.4%, and Carter profited by over $172,000.

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5. Additionally, in September 2019, the Officer was staying aboard Lewis’ yacht
when the Officer learned of positive results from a clinical trial related to a cancer drug being
developed by “Issuer B,” another public company in which the Fund and Lewis each had
substantial investments.  The Officer, who sat on Issuer B’s board of directors, also learned that
the company may present these results at a conference at the end of October 2019 (the “October
Biotech Conference”).
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  Lewis was also on his yacht when the Officer learned this information,
he met with the Officer at that time, and the Officer shared material nonpublic information about
Issuer B with Lewis.  Lewis understood that the Officer expected Lewis to maintain this
information’s confidentiality.
6. In breach of his duty of trust and confidence, Lewis then tipped Carter, O’Connor,
and Waugh this inside information about Issuer B.  Within days of the Officer learning this
information, Carter and then later O’Connor and Waugh purchased Issuer B’s common stock
based on that tip.
7. Together, these three tippees bought over $3 million worth of Issuer B’s stock.
And in O’Connor and Waugh’s case, each used a $500,000 loan extended by Lewis to execute
the trades.  To execute some of his trades, O’Connor used a brokerage account held by his wife,
Jean J. O’Connor.  The day after Issuer B announced positive data from its clinical trial at the
October Biotech Conference, its share price increased by 16.7%, and Carter, O’Connor, and
Waugh together profited by over $373,000.
VIOLATIONS

8. By virtue of the foregoing conduct and as alleged further herein, Defendants
violated U.S. insider trading prohibitions, in particular, Section 10(b) of the Securities Exchange

1
 The conference name has been anonymized in this Complaint.

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Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R.
§ 240.10b-5].
9. Unless Defendants are restrained and enjoined, they will engage in the acts,
practices, transactions, and courses of business set forth in this Complaint or in acts, practices,
transactions, and courses of business of similar type and object.
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT

10. The Commission brings this action pursuant to authority conferred upon it by
Sections 21A of Exchange Act [15 U.S.C. § 78u-1].
11. The Commission seeks a final judgment: (a) permanently restraining and
enjoining Defendants from violating the federal securities laws and rules this Complaint alleges
they violated; (b) ordering Defendants and the Relief Defendant to disgorge any ill-gotten gains
they received as a result of the violations alleged here and to pay prejudgment interest thereon
pursuant to Exchange Act Section 21(d)(3), 21(d)(5) and 21(d)(7) [15 U.S.C. §§ 78u(d)(3), (d)(5)
and 78u(d)(7)]; (c) ordering Defendants to pay civil money penalties pursuant to Exchange Act
Section 21A [15 U.S.C. § 78u-1]; and (d) ordering any other further relief that the Court may
deem just and proper.
JURISDICTION AND VENUE

12. This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), 21A,
and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), 78u-1, and 78aa].
13. Defendants, directly and indirectly, made use of the means or instrumentalities of
interstate commerce or of the mails in connection with the transactions, acts, practices, and
courses of business alleged herein.

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14. Venue is proper in the Southern District of New York pursuant to Section 27 of
the Exchange Act [15 U.S.C. § 78aa(a)].  More specifically, certain of the transactions, acts,
practices, and courses of business constituting the violations alleged herein occurred within the
Southern District of New York and elsewhere, and were effected, directly or indirectly, by
making use of the means, instruments, or instrumentalities of transportation or communication in
interstate commerce, or of the mails, or the facilities of a national securities exchange.  As
detailed below, orders and executions of securities transactions described herein involved
securities listed on stock exchanges located within this District, and the Defendants also used
correspondent banks in this District to clear U.S. dollar transfers that they initiated as part of
their unlawful schemes.
DEFENDANTS
15. Joseph C. Lewis, age 86, is a British citizen who resides principally in The
Bahamas.  He is the ultimate majority owner of the Fund, and is the sole indirect owner,
president, and a director of the Fund’s manager, “Fund Management Inc.”
16. Carolyn W. Carter, age 33, is a U.S. citizen who resides in the U.S. Virgin
Islands.  Carter and Lewis were in a romantic relationship from approximately 2013 to 2020.
17. Patrick J. O’Connor, age 66, is a U.S. citizen who resides in New York.
O’Connor is one of Lewis’ private jet pilots.
18. Bryan L. Waugh (a/k/a Marty Waugh), age 64, is a U.S. citizen who resides in
Virginia.  Waugh is one of Lewis’ private jet pilots.
RELIEF DEFENDANT
19. Jean J. O’Connor, age 66, is a U.S. citizen who resides in New York.  She is
Patrick O’Connor’s wife.  Patrick O’Connor’s unlawful trading activity was conducted, in part,
through a brokerage account held by Jean J. O’Connor.

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RELEVANT ENTITIES
2

20. Investment Group is Lewis’ private investment organization, which has
investments in over 200 operating companies.  Its principal place of business is in Florida.
21. The Fund is a Delaware limited liability company with its principal place of
business in California.  The Fund’s limited liability company manager is Fund Management Inc.
22. Fund Management Inc. is a Bahamian company with its principal place of
business in The Bahamas.  It is the manager of the Fund.  At all relevant times in this Complaint,
Lewis was the sole indirect owner, president, and a director of Fund Management Inc.
23. Issuer A is a Delaware corporation with its principal place of business in
Massachusetts.  Shares of its common stock are registered with the Commission pursuant to
Section 12(b) of the Exchange Act and trade on the Nasdaq Global Select Market, which is
located in this District.
24. Issuer B is a Delaware corporation with its principal place of business in
California.  Shares of its common stock are registered with the Commission pursuant to Section
12(b) of the Exchange Act and trade on The Nasdaq Stock Market LLC, which is located in this
District.
TERM USED IN THIS COMPLAINT
25. PIPE Offering:  Private Investment in Public Equity (“PIPE”) refers to the
private placement of securities of an already public company, typically offered to a limited group
of institutional accredited investors.  The public company typically allows potential PIPE
investors to view material nonpublic information before deciding whether to invest.  This

2
 The entities’ names have been anonymized in this Complaint.

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requires the potential investor to agree to maintain the confidentiality of information shared by
the company and to cease or restrict the investor’s trading in the company’s securities.
FACTS
I. Lewis was Entrusted with Material Nonpublic Information and Knew That He Had
a Duty to Maintain its Confidentiality
26. Lewis is the founder of and principal investor in Investment Group, a firm that
invests in operating companies around the world.  At all relevant times, Lewis had a substantial
investment in the Fund, which he helped found in 2005 with an investment of approximately
$5.7 million, and which is held out as being a part of Investment Group.  By the end of June
2019, the Fund held assets exceeding $1 billion, and it had major equity investments in dozens of
publicly traded biotechnology companies.
27. From no later than February 28, 2017 through at least October 29, 2019, Lewis
was president, treasurer, secretary, and a director of Fund Management Inc., in addition to being
its sole indirect owner.  Because Fund Management Inc. owned a majority of the Fund’s
membership interests and was also the Fund’s manager under its limited liability company
operating agreement, Lewis had ultimate control over the Fund.  Moreover, Fund Management
Inc., including Lewis and its other officers and directors, owed a duty of trust and confidence to
the Fund and its other shareholders.
28. Due to its major investments in biotechnology companies, the Fund sometimes
had a contractual right to appoint members of certain public companies’ boards of directors.  In
these director roles, the Fund’s officers received material nonpublic information about these
companies.  The Fund was also invited to participate in PIPE offerings of certain public
companies, which allowed its officers to review the public companies’ material nonpublic
information pursuant to confidentiality agreements.

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29. Due to his role with the Fund, Lewis was often privy to material nonpublic
information.  Further, officers of the Fund also shared with Lewis material nonpublic
information they learned as public company directors or pursuant to PIPE offerings.  In these
situations, Lewis typically owed a duty of trust and confidence to the source of the information,
including as a result of a confidentiality agreement between the Fund and the company, and/or he
owed a duty of trust and confidence to the officer of the Fund who shared material nonpublic
information with him in confidence.
30. Further, Lewis was well aware of his duties of trust and confidence.  Indeed, the
Officer informed Lewis on numerous occasions prior to July 2019 that Lewis was not to share
any material nonpublic information that he learned from the Fund’s officers.  The Officer also
directed Lewis to first inform the Fund prior to purchasing or selling equity securities (stock) in
biotechnology companies because the Fund could have material nonpublic information about the
biotechnology company whose stock Lewis wished to trade.
31. Lewis never challenged or questioned the Officer’s warnings about not sharing
material nonpublic information, nor did he indicate that he misunderstood them.  Indeed, Lewis’
personal trader, who bought and sold equity securities and other financial assets for Lewis and
Lewis-controlled entities, gave the appearance of honoring the Officer’s request to Lewis by
frequently informing the Fund’s officers and employees of biotechnology securities that Lewis
wished to trade.  Despite the Officer’s warnings about Lewis’ duty of confidentiality, Lewis
chose to breach his duty when he tipped material nonpublic information obtained from the
Officer about Issuers A and B to the other Defendants.  As further explained below, on each
occasion, Lewis knew, consciously avoided knowing, or was reckless in not knowing the

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information he communicated to Carter, O’Connor, and Waugh was material and nonpublic, and
that his communications breached his duty of trust and confidence.
II. Lewis Illegally Tipped Material Nonpublic Information about Issuer A to Carter,
Which Carter then Illegally Traded Upon
A. Lewis and Carter Had a Close Personal Relationship, Which Made Carter Aware
That Lewis Was Entrusted with Material Nonpublic Information

32. Lewis and Carter were in a close romantic relationship from approximately 2013
to 2020.  Carter moved in with Lewis in 2015 or 2016.  He frequently gave her gifts, including
cash transfers amounting to approximately $100,000 per year.
33. Lewis also took an active interest in Carter’s investing.  Indeed, Lewis provided
Carter with the funds that she used to open an account with Broker 1 in November 2016.  He
then often guided Carter’s investment strategy.  For instance, he encouraged Carter’s first trade
on March 15, 2017, which was the purchase of a biotechnology stock.  And between her first
trade in March 2017 and the end of October 2019, Carter only ever traded in stocks in which the
Fund and/or Lewis had invested.  Indeed, Carter sometimes emailed Lewis when one of these
companies—including Issuer B—did particularly well or poorly on a given trading day.
34. Lewis also kept Carter informed about companies in which the Fund had invested.
In particular, from no later than April 2017 through at least April 2020, Lewis often forwarded
and directed the forwarding of confidential emails and attachments to Carter, including the
Fund’s portfolio statements and confidential analyses of companies in its investment portfolio.
These portfolio statements showed all of the companies in which the Fund was invested,
including the number of shares and percentage of each company that the Fund owned.  Lewis
shared these statements with Carter, even though the Officer had told him they were confidential
and must not be shared.

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35. Many of the emails and attachments that Lewis forwarded or directed be
forwarded to Carter included confidentiality markings, such as “CONFIDENTIAL | NOT FOR
DISTRIBUTION” and “This email message is for the sole use of the intended recipient(s) and
may contain confidential information.”   Lewis and those acting at his direction never copied the
Officer nor any other officers or employees of the Fund when forwarding these materials to
Carter.
36. Further, because Lewis and Carter were romantically involved, she was regularly
with Lewis on his yacht and elsewhere.  Over the years, Carter was present when Lewis met with
the Fund’s officers, including the Officer, and biotechnology company executives.
37. Thus, Carter knew, was reckless in not knowing, or consciously avoided knowing
that Lewis’ role at the Fund meant he was entrusted with material nonpublic information.
B. Lewis Tipped Material Nonpublic Information about Issuer A to Carter, Which
Carter Then Traded Upon

38. In 2019, Lewis tipped material nonpublic information to Carter on at least two
occasions.
39. On the first occasion, on or about July 18, 2019, an investment banker for Issuer
A i nformed the Officer that Issuer A intended to conduct a PIPE offering and asked if the Fund
wished to participate.  As part of the PIPE offering, Issuer A would share nonpublic information
with the Fund before the Fund decided whether to invest.  The next day, the Fund entered into a
confidentiality agreement with respect to the PIPE offering (“PIPE Confidentiality Agreement”),
which prohibited the Fund, including its “affiliates, directors, officers, employees, agents or
advisors,” from sharing the existence or terms of the PIPE offering.  As president, director, and
sole indirect owner of the Fund’s manager, Lewis was bound by this confidentiality agreement.

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40. Lewis learned of Issuer A’s PIPE offering no later than July 25, 2019, when he
and Carter were staying at a luxury hotel in South Korea.  The Officer informed Lewis via email
of Issuer A’s PIPE offering and the Fund’s allocation therein.
41. The Officer had specifically counseled Lewis in the past to treat as confidential
any nonpublic information concerning issuers’ financing events.  Accordingly, Lewis knew,
consciously avoided knowing, or was reckless in not knowing that he had a duty of trust and
confidence as to the PIPE offering, and that the offering’s existence constituted material
nonpublic information.
42. Lewis also knew that the Fund had signed confidentiality agreements in
connection with prior issuer financings, and that he had been bound by those agreements as an
officer and director of the Fund’s manager.  Therefore, Lewis either knew, consciously avoided
knowing, or was reckless in not knowing that he had a duty of trust and confidence regarding the
PIPE offering.
43. On July 25, 2019, approximately seven hours after Lewis received the Officer’s
email, Carter emailed Lewis to suggest they get room service for dinner, and that she come to his
hotel room.  Three hours after they were scheduled to meet in Lewis’ hotel room, Carter made a
purchase order for 150,000 shares of Issuer A at a price of $700,673.23, or approximately $4.67
per share.
44. During their evening meeting, Lewis tipped Carter material nonpublic information
regarding the PIPE offering for personal benefit, including the benefit of making a gift of
material nonpublic information to his girlfriend.  Lewis also knew, consciously avoided
knowing, or was reckless in not knowing that the information he communicated to Carter about
the PIPE offering would be used for trading.

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45.After Carter traded on the material nonpublic information provided by Lewis,
99% of her brokerage account value was invested in Issuer A.  Further, prior to this trade, Carter
had never traded in Issuer A, and she has not traded in it since selling her 150,000 Issuer A
shares in September 2019.
46.The next day, Issuer A announced a $60 million private placement in which
several institutional investors, including the Fund, participated.  That day, Issuer A closed at
$5.82 per share—approximately 34.4% higher than the previous day’s close of $4.33 pershare.
Its trade volume on the first trading day after the announcement was approximately 6.66 times
higher than its 15-day simple moving average trade volume.
47.When Carter sold her Issuer A shares in September 2019, she realized a profit of
approximately $172,326 from the July 26, 2019 price increase.  Her total profit was
approximately $888,775, due to Issuer A share price movements that took place after July 26,
2019.
48.Carter knew, consciously avoided knowing, or was reckless in not knowing that
the PIPE offering was material nonpublic information, and she used this information to trade in
Issuer A.  First, and most importantly, she knew, consciously avoided knowing, or was reckless
in not knowing that Lewis had this information because of the Fund’s ownership interest in
Issuer A.  More specifically, earlier that same month, Carter received the Fund’s portfolio
statement, which indicated that the Fund owned approximately 9.9% of Issuer A.  Second, Carter
was aware that PIPE offerings had a positive impact on biotechnology companies because she
had previously purchased shares of a biotechnology company (Issuer B) just prior to a PIPE
offering, and those shares also saw a substantial increase in value just after the offering’s
announcement.  Third, Carter’s unusual trading activity and the commitment of 99% of her

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brokerage account assets to this investment indicate she knew the importance of this information
to the market.
49. Finally, Carter knew, consciously avoided knowing, or was reckless in not
knowing that Lewis breached a duty of trust and confidence for personal benefit by providing her
with information about the PIPE offering.  First, Carter was aware of Lewis’ high-level role in
the Fund and she had been been privy to numerous emails from Lewis containing information
marked as confidential.   Second, she also knew of Lewis’ major investment in Issuer A through
the Fund, and that Lewis often met with executives of companies in which he invested.  And as
Lewis’s direct tippee, Carter was of course aware of the personal benefit Lewis received from
giving her—his romantic partner—a gift of inside information about the PIPE offering.
III. Lewis Illegally Tipped Material Nonpublic Information About Issuer B to Carter,
O’Connor, and Waugh, Which They Each Then Illegally Traded Upon
50. A few weeks after Lewis breached his duties of trust and confidence to Issuer A
and the Officer by illegally tipping Carter, Lewis did it again—but this time, he illegally tipped
not just Carter but also his longtime private pilots, O’Connor and Waugh.  All three Defendants
took advantage of material nonpublic information provided by Lewis concerning Issuer B, and
together profited by over $373,000.
A. The Officer Provided Material Nonpublic Information about Issuer B to Lewis
Pursuant to Their Longstanding Relationship of Trust and Confidence

51. In August 2019, the Officer, who was a member of Issuer B’s board of directors,
emailed Lewis his view that Issuer B’s share price would remain between $80 and $120 until it
publicized clinical trial data showing that it could be competitive with another biotechnology
company that was developing a similar trial drug.
52. In September 2019, the Officer learned that a patient in a clinical cancer trial had
experienced positive results from Issuer B’s trial drug.  On September 11, 2019, for instance,

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Issuer B’s CEO emailed the Officer and other board members that one patient had experienced a
“PR”—a partial response, meaning that the patient’s tumor had shrunk by over 30% after being
dosed with the trial drug.  The Officer responded minutes later:  “Great initial read at that dose!”
Other board members responded “Agree!” and “Great news, [CEO].”
53. Then, on September 17, 2019, Issuer B’s CEO emailed the Officer a scan showing
a clear and dramatic shrinkage of the trial patient’s tumor, along with the message, “Test your
radiological skills on this one. . . .  Obviously also had dramatic symptom improvement.”  In this
same email, the CEO also suggested presenting clinical data at the October Biotech Conference.
As a member of the board of directors, the Officer owed a duty of trust and confidence to Issuer
B with respect to this and other information he received in that capacity.
54. The Officer was a guest aboard Lewis’ yacht from September 11 to 13, and again
from September 15 to 18, 2019, when the Officer learned of the confidential positive news about
Issuer B’s clinical trial results for its cancer drug.  And shortly after the Officer received the
email from Issuer B’s CEO on September 11, the Officer had dinner with Lewis and another
Investment Group officer aboard the yacht.  At the dinner, all three were optimistic about Issuer
B’s future and the prospects for its cancer drug.  During the dinner, Lewis and/or the Investment
Group officer suggested Issuer B’s share price, which had generally been trading between $80
and $90 for the previous two weeks, might trade up to the mid-100s.  The Officer responded by
stating that the share price might rise to over $200, which was well above the $80 to $120 range
in the Officer’s August 2019 email to Lewis.  At the dinner, the Officer conveyed material
nonpublic information about Issuer B’s clinical trial to Lewis.  Either that night or later that
week, the Officer and Lewis also discussed the possibility that Issuer B would present results
from its trial at the October Biotech Conference.   Lewis knew, based on prior conversations with

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the Officer, that the Officer would urge Issuer B to present trial results only if the data were
positive.
55. Additionally, Lewis and the Officer were both aboard Lewis’ yacht on September
17, 2019, after Issuer B’s CEO had earlier that day emailed the Officer about the trial patient’s
tumor size reduction and suggested presenting clinical data at the October Biotech Conference.
56. When the Officer shared confidential and material nonpublic information with
Lewis, Lewis knew that the Officer was a member of Issuer B’s board of directors and that the
Officer was entrusted with inside information because of the Officer’s role.  Further, Lewis also
knew that the Officer had for years shared inside information with Lewis because of Lewis’ role
with the Fund and Lewis’ associated duty of trust and confidence to both the Fund, including
information about the Fund and the issuers in which the Fund invested,  and to the Officer.
Indeed, the Officer had on numerous occasions informed Lewis that Lewis was not to share any
material nonpublic information that he learned from the Officer and other officers of the Fund
about any issuer in which the Fund invested.  Lewis and the Officer had a history, pattern, or
practice of sharing confidences, such that the Officer expected Lewis to maintain this
information’s confidentiality, and Lewis was aware that the Officer expected Lewis to maintain
this information’s confidentiality.  Therefore, Lewis either knew, consciously avoided knowing,
or was reckless in not knowing that he had a duty of trust and confidence to the Officer with
respect to any such information.
57. Moreover, based on Lewis’ previous investments in biotechnology companies,
Lewis was aware that share prices often increased after a company announced positive clinical
results.  And Lewis was aware that these clinical results had not been publicly announced.  Thus,

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Lewis knew, consciously avoided knowing, or was reckless in not knowing that the Officer’s
statements to him about Issuer B constituted material nonpublic information.
B. Lewis Tipped Carter with Material Nonpublic Information About Issuer B and
Carter Traded on that Information

58. Shortly after Lewis’ meetings with the Officer aboard his yacht, Lewis tipped
Carter with the material nonpublic information about Issuer B that he had learned from the
Officer.  In so doing, he violated his duty of trust and confidence to the Officer.  Lewis tipped
Carter for personal benefit, including the benefit of making a gift of material nonpublic
information to his girlfriend.  Lewis also knew, consciously avoided knowing, or was reckless in
not knowing that the information he communicated to Carter about Issuer B and the positive
clinical trials would be used for trading.
59. Indeed, on September 17, 2019, approximately 90 minutes after the Officer
received the second email from Issuer B’s CEO, Carter entered a note on her phone, which she
subsequently modified on September 19:
“Sell at 15% at the volume until 150,000 shares are sold” -  call Joe after the
[Broker 1] call
10,360 volume
@ $10.50
Done @1:45pm in a perfect world
I have an order to sell @15% of the volume
I would like to change it to 25% of the volume
With a $9.50 low
125K
[Issuer B]: buy at 15% of the volume, cap @$90.00
[Issuer A]: sell at 15% of the volume, low @$9:50
In Carter’s notes, “Joe” was a reference to Lewis.  “Broker 1” was the name of the brokerage
where Carter held an account.
60. On September 18, Carter logged into her Broker 1 electronic account portal,
called Broker 1, and asked to sell all Issuer A shares in her account.  She told the Broker 1

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representative, “I’d like to do 15% of the volume until everything is sold.”  She was advised to
call back about 30 minutes later when the market was open.  She did so while simultaneously
logged into her Broker 1 account portal, and repeated over the phone that she wished to sell her
Issuer A shares, adding “I’d like to trade 15% of the volume until all 150,000 shares are sold.”
61.Carter’s request to sell her shares at 15% of the daily trade volume of Issuer A is a
strategy sometimes used by sophisticated investors to sell large quantities of securities with
minimal or no reduction in the securities’ sale price.
62.Consistent with the note in her phone, Carter later asked Broker 1 to change her
sale order from 15% to 25% of the daily trade volume.
63.Broker 1 complied with Carter’s trade order, and began selling Carter’s 150,000
Issuer A shares shortly after the market opened on September 18.  Several minutes after Broker 1
began executing Carter’s Issuer A trade order, she emailed Lewis:  “Good morning!  All good &
all confirmed.”
64.The last of Carter’s Issuer A share sales were completed shortly before market
close on September 19.  Her total proceeds from these sales was approximately $1,551,856.
Carter used the bulk of her sale proceeds—approximately $1,449,330—to buy shares of Issuer B
from September 19 to 20, 2019.  As with her Issuer A sales, she followed Lewis’ instructions to
conduct a market volume purchase of Issuer B shares.  On September 25, Carter bought an
additional $17,700 worth of Issuer B shares.

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65. On September 30, 2019, Carter called Broker 1 to ask whether she could buy
Issuer B shares on margin.
3
  Carter, however, was told by a Broker 1 representative that Issuer B
shares were effectively excluded from margin trading.
66. Undeterred, Carter bought approximately $23,781 worth of Issuer B stock on
September 30 using money she had transferred to her brokerage account three days earlier.  By
this time, Carter had spent approximately $1,490,811 purchasing Issuer B stock—over 99% of
her brokerage account value and a significant portion of her overall net worth.
67. When Carter executed her trades using information received from Lewis, she
knew, consciously avoided knowing, or was reckless in not knowing that the information about
Issuer B and the positive clinical trials was material and nonpublic, and that Lewis breached a
duty of trust and confidence for personal benefit when he provided her with material nonpublic
information.  First, Carter had just a few weeks prior illegally purchased Issuer A stock under
similar circumstances.  Second, she also, in the past, purchased Issuer B’s stock on three separate
occasions just prior to the release of information resulting in a rise in Issuer B’s stock price.
Thus, Carter understood the impact that positive press releases can have on Issuer B’s stock price
when released.  Third, the timing, unusual trading, and the extent of Carter’s investment in Issuer
B reflects that she knew the importance of the information Lewis provided to her.  Finally, Carter
knew that Lewis was essentially the Officer’s employer, that Lewis frequently received
significant information about various issuers from the Officer, that the Officer was on Issuer B’s
board of directors, and that Lewis frequently forwarded to Carter confidential emails and

3
 Buying shares on margin means that an account holder borrows money from the brokerage,
which then uses the money to conduct the stock purchase.  The account holder must pay back the
margin loan whether the share price increases or decreases, making this a risky method of
funding stock trading.

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attachments he had received from the Officer.  And as Lewis’s direct tippee, Carter was of
course aware of the personal benefit Lewis received from giving her—his romantic partner—a
gift of inside information about Issuer B and the positive clinical trials.
C. Lewis Tipped O’Connor and Waugh with Material Nonpublic Information About
Issuer B

68. A few weeks after learning material nonpublic information about Issuer B from
the Officer, Lewis tipped his longtime private pilots, O’Connor and Waugh, with this
information.  In so doing, he violated his duty of trust and confidence to the Officer.  Lewis
tipped O’Connor and Waugh for personal benefit as a gift and/or as part of a quid pro quo for
direct or indirect pecuniary gain as a substitute for providing a formal retirement plan for his
pilots.  Lewis also knew, consciously avoided knowing, or was reckless in not knowing that the
information he communicated to O’Connor and Waugh about Issuer B would be used for
trading.
i. Lewis was committed to helping O’Connor and Waugh with their investments

69. O’Connor and Waugh began working as Lewis’ private jet pilots in 2005 and
2001, respectively.
70. Starting no later than November 2016, Lewis began providing investment advice
to both O’Connor and Waugh.  Lewis had numerous and sometimes lengthy conversations with
O’Connor and Waugh concerning stock trading, and they acted on his advice.  For example, at
the end of October 2016, Lewis invited O’Connor and Waugh to speak with him about
companies to invest in.  Following this conversation, O’Connor and Waugh reported to Lewis’
assistant the dollar amounts they wished to invest in specific companies.  And in December
2016, a company controlled by Lewis loaned O’Connor and Waugh $80,000 and $50,000,

20
respectively.  At the end of December 2016, O’Connor and Waugh invested $48,675.25 and
$18,766.86, respectively, in the companies Lewis had recommended, including Issuer B.
71.Lewis’ investment advice to O’Connor and Waugh continued for years.  In
numerous WhatsApp messages written between 2017 and 2020, O’Connor described the
investment advice he and Waugh received from Lewis, which frequently included Lewis’
recommendations to buy specific stocks at specific times.
72.One such stock included an Australian company of which Lewis owned over
40%.  Although Lewis had recommended in or about October 2018 that O’Connor and Waugh
buy stock in this company, it suffered a setback in early 2019.  After Lewis’ board appointees at
this company contacted Lewis to inform him of this information, and just hours after a board
meeting concerning a planned press release about the setback, Lewis called O’Connor and
O’Connor immediately attempted to sell all his shares.  However, O’Connor was unable to sell
his shares before the company issued a press release about the setback, which was followed by a
stock price drop.  Further, approximately thirty minutes after the call, Waugh too attempted to
sell his shares, but also failed to avoid the stock price drop.  O’Connor’s encrypted
communications confirm that he believed Lewis provided him material and nonpublic
information with the expectation that O’Connor would sell his shares in the company.
73.In addition to providing investment advice and confidential information to
O’Connor and Waugh, Lewis also provided them with financial assistance.  On at least twelve
occasions from 2013 to 2019, Lewis loaned five- and six-figure sums to them, which often
funded their stock trading.  These were frequently “non-recourse” loans, meaning that the lender
could not take legal action to seek repayment if the borrower defaulted.

21
74.According to Waugh, Lewis provided the foregoing assistance to him and
O’Connor, in part, to make up for their lack of a formal retirement plan through their employer,
which was a part of Investment Group.
75.Further, in addition to their investment conversations with Lewis, O’Connor and
Waugh also frequently emailed each other about stocks, including the stocks that Lewis had
discussed with them.  In their jobs as private jet pilots, O’Connor and Waugh typically traveled
about 200 days per year, during which they flew together.  Their flights were often hours long,
giving them ample opportunity to speak with each other about investing and other topics.
ii.Lewis provided material nonpublic information about Issuer B to O’Connor
and Waugh
76.O
’Connor and Waugh flew Lewis from San Diego, California, to The Bahamas
on October 10, 2019.  During that flight, Lewis tipped O’Connor and Waugh the material
nonpublic information about Issuer B that he had learned from the Officer the previous month.
77.Later that same evening, after receiving the tip from Lewis, O’Connor emailed to
request that Broker 2 “place a buy order for [Issuer B] at market value” and that there was
“[m]ore money coming your way next week to invest in [Issuer B].”  By the following day,
O’Connor had purchased $204,080 worth of Issuer B stock.
78.Just two minutes after emailing his broker at Broker 2, O’Connor entered an order
to sell all shares of Issuer A in the Broker 3 account of his wife, Jean J. O’Connor.  Five minutes
later, Patrick O’Connor entered an order to sell all his shares of Issuer A in his and Jean J.
O’Connor’s joint account with Broker 4.  The shares in both accounts were sold the following
morning for total proceeds of approximately $114,720.  Shortly afterwards, O’Connor entered an
order with Broker 3 to buy another approximately $103,289 worth of Issuer B shares, and a
separate order with Broker 4 to buy approximately $7,594 worth of Issuer B shares.

22
79.Further, also on the evening of October 10, O’Connor messaged an acquaintance,
“Individual 1,” via an encrypted mobile app.  He wrote that he had spoken with Lewis earlier
that day, and he then advised Individual 1 to sell all of his shares of Issuer A and “buy as much
[Issuer B] as you can.”  They continued:
O’CONNOR:     Spoke to boss today in length
INDIVIDUAL 1: Ok, [Issuer A] is done...
O’CONNOR: No. [Issuer A] not done but we will make much more
within the next 6 weeks with [Issuer B].
INDIVIDUAL 1: Ok, understood
O’CONNOR:     Boss said he really really likes [Issuer B] right now.
Think we have people who know
Get it done amigo.
* * *
         INDIVIDUAL 1: Thanks for advice me Amigo! [sic]
O’CONNOR:     No worries amigo.
Boss said to bug him more.
He forgets about us
Today he approached me though so this is another goodie.
This six-week timeframe O’Connor mentioned in his message encompassed the October Biotech
Conference.
80.Several days later, O’Connor again messaged with Individual 1 via an encrypted
mobile app:
O’CONNOR:     You okay with [Issuer B]
Boss is helping us out and told us to get ASAP
INDIVIDUAL 1: 
4
Put big money last friday
O’CONNOR:     Perfect
All conversation on app is encrypted so all good.
No one can ever see
4
 We note the emojis used in the conversation have a slightly different appearance in the messaging application that
was used.

23
81.Waugh also moved quickly on Lewis’ tip, placing an order with Broker 2 to buy
$88,010 worth of Issuer B shares on October 11, 2019, the day after he flew Lewis to The
Bahamas.
82.On October 13, 2019, Lewis’ executive assistant emailed bank wire instructions.
Two of the instructions were for a transfers of $500,000 each to O’Connor and Waugh.  In her
transmittal email, Lewis’ assistant described these as “Loan to Patrick and Marty as discussed on
the flight over on Thursday.”  Lewis signed the bank wire instructions himself.
83.A few days later, on October 15, 2019, $500,000 was wired into O’Connor’s
account at a bank based in New York and $500,000 into Waugh’s account at a bank based in
North Carolina, both from an account controlled by Lewis at a Switzerland-based financial
institution.  These bank wires were transferred through a correspondent bank in this District.  On
that same day, O’Connor used the encrypted mobile app to inform Individual 1 that Lewis said to
buy Issuer B stock, but that Issuer B “should only be short term,” and that the “Boss mentioned
around 6 to 8 weeks for [Issuer B] to take profit.”
84.And on October 16, 2019, Waugh’s broker entered a client call note:  “[Waugh]
called me yesterday and told me to transfer in $250,000 from his [bank] account to his brokerage
account and us[e] it to purchase as many share of [Issuer B] as possible.  I inputted the transfer
and will make the trade this morning.”  That day, Waugh’s account with Broker 2 bought
approximately $250,494 worth of Issuer B stock.
85.The morning of October 17, 2019, Issuer B announced that it would take part in
the October Biotech Conference.  That day, Issuer B’s share price closed approximately 8.3%
above the previous day’s closing price.  A little over a week later, on October 25, Waugh sold
some Issuer B shares in his Broker 2 account for a net profit of approximately $3,409.

24
86.On October 21, 2019, Waugh sold shares of Issuer A for approximately $139,240
and used the sale proceeds to fund his purchase of more Issuer B stock.  On October 25, 2019,
Waugh sold shares of an index fund for approximately $99,766 and used the sale proceeds to
fund his purchase of more Issuer B stock.
87.Then, on October 22, 2019, O’Connor again messaged Individual 1 via an
encrypted mobile app:  “28th is a big day for [Issuer B]”.  O’Connor was referring to the October
Biotech Conference, which was held on October 28, 2019, and is when Issuer B first announced
data from its clinical trial.  The encrypted conversation continued:
O’CONNOR: Think the Boss has inside info. Otherwise why would he
make us invest.
* * *
INDIVIDUAL 1: What’s your target price to sell?
O’CONNOR:     Not sure.
Well over $100
52 week high I think is $112
INDIVIDUAL 1: Yes...
O’CONNOR:     No worries.
We won’t dump on the 28th.
You can relax.
* * *
O’CONNOR: Boss lent [Waugh] and I $500,000 each for this. [I’m]
pretty sure he knows the outcome
INDIVIDUAL 1: Wow!!!!
He really loves you!
O’CONNOR:     He told me to buy
And asked if I had spare cash
I said all invested and I need him.
I was like a little puppy looking up at him.  He couldn’t
refuse
[Waugh] just holds on and says I got big balls
* * *
I
NDIVIDUAL 1: He must be sure you will make good money, or at least
dont loose all [sic]

25

O’CONNOR:  BINGO.
88. On October 26, 2019, O’Connor emailed Waugh a link to Issuer B’s press release
that it would be presenting clinical data at the October Biotech Conference.
89. From the time of their October 10 flight with Lewis until October 27, 2019—the
day before Issuer B announced its clinical data at the October Biotech Conference—O’Connor
bought approximately $819,531 worth of Issuer B stock and Waugh bought approximately
$761,527 worth of Issuer B stock.  This represented several years’ worth of salary for both pilots.
90. As to their Issuer B stock purchases through Broker 2, O’Connor and Waugh both
entered stop-loss orders, which is a risk-mitigation mechanism that would cause their Issuer B
stock to be sold automatically if its share price fell below a certain price.  On October 28, 2019,
the stop-loss order was triggered in both O’Connor’s and Waugh’s accounts when Issuer B’s
share price temporarily fell below approximately $79.00 several minutes after markets opened.
Thus, all the Issuer B shares in O’Connor’s Broker 2 account were sold at an average price of
approximately $76.74 per share, and all Issuer B shares in Waugh’s Broker 2 accounts were sold
at an average price of approximately $76.28 per share.
91. Within several hours of the stop-loss orders being triggered, both O’Connor and
Waugh had used all or almost all the proceeds from their stop-loss sales to repurchase Issuer B
shares.  This was several hours before Issuer B made its announcement of clinical data.
92. When they purchased Issuer B stock between October 10 and October 28, 2019,
O’Connor and Waugh both knew that Lewis controlled Investment Group, and that
representatives of Investment Group sat on Issuer B’s board of directors.  For instance, on
January 10, 2018, Waugh sent O’Connor an email with a subject line that included Issuer B’s
stock ticker symbol:  “Looks like two [Investment Group] guys are on the board.”  He emailed

26

O’Connor later the same day:  “Also wonder what the boss thinks about reinvesting in [Issuer
B].”  And as both were directly tipped by Lewis, O’Connor and Waugh were of course aware of
the personal benefit Lewis received from gifting them this inside information, as well as their
quid pro quo of communicating inside information to his pilots as a substitute to providing them
a formal retirement plan.  Accordingly, both O’Connor and Waugh knew, consciously avoided
knowing, or were reckless in not knowing that the information Lewis provided them had been
obtained in breach of a duty of trust and confidence for personal benefit.
93. Moreover, the timing, unusual trading, and the extent of O’Connor and Waugh’s
investments in Issuer B reflects that both knew, consciously avoided knowing, or were reckless
in not knowing that the information to be contained in Issuer B’s announcement, which would
positively affect the stock price, was material nonpublic information, and that they used this
information to trade in Issuer B.  Further, O’Connor, in his messages above, explicitly
recognized the inside nature of the information when he stated “Think the Boss has inside info.
Otherwise why would he make us invest.”  He also recognized that his communications
concerned illegal activity, when he stated “All conversation on app is encrypted so all good. No
one can ever see.”  Finally, both O’Connor and Waugh had previously attempted to use their
prior knowledge of confidential information provided by Lewis to avoid losses in their
Australian investment.  Both therefore understood the impact important material and nonpublic
information can have on share prices, when disclosed publicly.
94. After stock markets closed on October 28, 2019, Issuer B announced positive data
from the clinical trial of its principal experimental cancer therapy at the October Biotech
Conference.  The following day, Issuer B’s share price closed at $95.10—approximately 16.7%

27

higher than the previous day’s closing price—and traded on volume exceeding 3.53 times its 15-
day simple moving average trade volume.
95. In November 2019, both O’Connor and Waugh repaid Lewis the principal amount
on their $500,000 loans, but without interest.  Waugh emailed Lewis’ assistant a receipt showing
the transfer of funds back to Lewis; the file name he gave to the receipt was “500000 loan
payback for [Issuer B].pdf.”
96. From November 1 to December 6, 2019, Carter sold 16,400 shares of Issuer B for
proceeds of $1,707,904, realizing a net profit of $217,092.  Of this net profit, $68,828 is
attributable to the share price increase immediately following Issuer B’s announcement on
October 28, 2019.
97. From November 1 to November 8, 2019, O’Connor sold 10,425 shares of Issuer B
for proceeds of $1,046,577, realizing a net profit of $227,060.  Of this net profit, $171,886 is
attributable to the share price increase immediately following Issuer B’s announcement on
October 28, 2019.
98. From October 28 to November 11, 2019, Waugh sold 9,380 shares of Issuer B for
proceeds of $925,672, realizing a net profit of $251,166.  Of this net profit, $132,507 is
attributable to the share price increase immediately following Issuer B’s announcement on
October 28, 2019.
99. Based on their close interaction with Lewis, each tippee Defendant knew,
consciously avoided knowing, or was reckless in not knowing that Lewis (1) was entrusted with
material nonpublic information and (2) had a duty of trust and confidence.  All three trusted
Lewis’ tipped inside information and invested a significant share of their personal wealth,

28
precisely because they believed Lewis was ahead of the market and had provided them with
material nonpublic information.
IV.Jean J. O’Connor Received Ill-Gotten Gains From Defendants’ Illegal Conduct
to Which She Has No Legitimate Claim
100.Jean J. O’Connor held the Broker 3 account in her own name and held the Broker
4 account jointly with Patrick O’Connor.  Accordingly, she received approximately $141,871 of
ill-gotten profits, which are directly attributable to Patrick O’Connor’s unlawful conduct
described herein, and she has no legitimate claim to those funds.
FIRST CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act
and Rule 10b-5 Thereunder (All Defendants)
101.The Commission realleges and incorporates by reference each and every
allegation contained in paragraphs 1 through 100.
102.By engaging in the conduct described above, Defendants, directly or indirectly,
singly or in concert, in connection with the purchase or sale of securities and by the use of the
means or instrumentalities of interstate commerce, or the mails, or the facilities of a national
securities exchange, knowingly and recklessly have (i) employed one or more devices, schemes,
or artifices to defraud; (ii) made one or more untrue statements of a material fact or omitted to
state one or more material facts, necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; or (iii) engaged in one or more acts,
transactions, practices, or courses of business which operated or would operate as a fraud or
deceit upon other persons.
103.By reason of the foregoing, Defendants, directly or indirectly, singly or in concert,
have violated and, unless enjoined, will again violate Exchange Act Section 10(b) [15 U.S.C. §
78j(b)], and Rules 10b-5(a), (b), and (c) thereunder [17 C.F.R. § 240.10b-5(a), (b) and (c)].

29
SECOND CLAIM FOR RELIEF
Other Equitable Relief, Including Unjust Enrichment and Constructive Trust
(As To Relief Defendant Jean J. O’Connor)
104.T
he Commission realleges and incorporates by reference each and every
allegation contained in paragraphs 1 through 100.
105.Pursuant to Exchange Act Sections 21(d)(3), (5), (7) [15 U.S.C. §§ 78u(d)(3), (5),
(7)], the Commission is authorized to seek and any Federal court may order disgorgement.
106.Relief defendant Jean J. O’Connor has received and possesses ill-gotten funds
derived from unlawful acts or practices of her husband Patrick J. O’Connor dictating that, in
equity and good conscience, she should not be allowed to retain such funds.
107.Jean J. O’Connor has no legitimate claim to this property.
108.As a result, Jean J. O’Connor is liable for unjust enrichment and should be
required to return her ill-gotten gains, in an amount to be determined by the Court.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court enter a Final
Judgment:
I.
Permanently restraining and enjoining Defendants and their agents, servants, employees
and attorneys and all persons in active concert or participation with Defendants from violating,
directly or indirectly, Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5
thereunder [17 C.F.R. § 240.10b-5];

30
II.
Ordering Defendants and Relief Defendant to disgorge all ill-gotten gains received
directly or indirectly, with pre-judgment interest thereon, as a result of the alleged violations
pursuant to Exchange Act Sections 21(d)(3), (5), (7) [15 U.S.C. §§ 78u(d)(3), (5), (7)];
III.
O
rdering Defendants to pay civil monetary penalties under Exchange Act Section 21A
[15 U.S.C. § 78u-1]; and
IV.
G
ranting any other and further relief this Court may deem just and proper.
JURY DEMAND
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff demands trial by
jury in this action of all issues so triable.

31
Date:  July 26, 2023 Respectfully submitted,
/s/ James P. Connor
James P. Connor*
Carina A. Cuellar*
U.S. S
ECURITIES AND EXCHANGE COMMISSION
Division of Enforcement
100 F Street, N.E.
Washington, DC 20549
Phone: (202) 551-8394 (Connor)
Phone: (202) 551-6414 (Cuellar)
Email: [email protected] (Connor)
Email: [email protected] (Cuellar)
*
Pending admission pro hac vice
Of Counsel
Timothy A. Work
Kevin Guerrero
Kristen Warden
U.S. SECURITIES AND EXCHANGE COMMISSION
Division of Enforcement
100 F Street, N.E.
Washington, DC 20549

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

U.S. SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 

v. 

JOSEPH C. LEWIS, CAROLYN W. 
CARTER, PATRICK J. O’CONNOR, and 
BRYAN L. WAUGH, 

Defendants, 
and 

JEAN J. O’CONNOR, 

Relief Defendant. 

Case No. 1:23-cv-6438

Jury Trial Demanded 

COMPLAINT 

Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against 

Defendants Joseph C. Lewis (“Lewis”), Carolyn W. Carter (“Carter”), Patrick J. O’Connor 

(“O’Connor”), and Bryan L. Waugh (“Waugh”) (collectively, the “Defendants”), and Jean J. 

O’Connor (the “Relief Defendant”), alleges as follows: 

SUMMARY 

1. This insider trading case involves billionaire investor Lewis illegally tipping

material nonpublic information to his then girlfriend, Carter, and his longtime private pilots, 

O’Connor and Waugh, so that each would use this information to execute trades.  All three of 

Lewis’ tippees traded on the material nonpublic information obtained through Lewis’ breaches of 

trust and confidence, and reaped combined profits of over $545,000. 

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2 

2. Lewis is the principal investor in, and chairman of, “Investment Group,” which

has investments in over 200 operating companies.  The Fund, which is a part of Investment 

Group, invests in biotechnology companies.  As the president, director, and sole indirect owner 

of the Fund’s manager, Lewis controlled and owed a duty of trust and confidence to the Fund. 

3. From 2015 to the present, the Officer has served as a senior officer with the Fund.

As a senior officer, the Officer often learned about material nonpublic information from 

biotechnology companies in which the Fund invested.  In light of Lewis’ role with the Fund and 

his associated duty of trust and confidence, the Officer often entrusted this material nonpublic 

information with Lewis.  Between approximately July and October 2019, Lewis breached his 

duty by illegally tipping material nonpublic information that he had learned from the Officer to 

Carter, O’Connor, and Waugh, who then traded on the basis of that information.   

4. More specifically, in July 2019, the Officer informed Lewis that a company in

which the Fund had a substantial investment (“Issuer A”) would be raising capital through a 

Private Investment in Public Equity (“PIPE”) offering.  A PIPE offering is a private placement of 

securities of an already public company that is typically offered to a limited group of institutional 

accredited investors.  This is a type of transaction that, in the biotechnology sector, frequently 

results in an increase in share price.  Lewis, who was bound by a confidentiality agreement not to 

share information about the transaction, tipped Carter this material nonpublic information when 

they met in a luxury hotel room the same day Lewis learned the information.  Within three hours 

of their meeting at the hotel, she bought over $700,000 worth of Issuer A’s common stock.  After 

Issuer A announced its capital raise the next day, its share price increased by approximately 

34.4%, and Carter profited by over $172,000. 

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3 
 

5. Additionally, in September 2019, the Officer was staying aboard Lewis’ yacht 

when the Officer learned of positive results from a clinical trial related to a cancer drug being 

developed by “Issuer B,” another public company in which the Fund and Lewis each had 

substantial investments.  The Officer, who sat on Issuer B’s board of directors, also learned that 

the company may present these results at a conference at the end of October 2019 (the “October 

Biotech Conference”).1  Lewis was also on his yacht when the Officer learned this information, 

he met with the Officer at that time, and the Officer shared material nonpublic information about 

Issuer B with Lewis.  Lewis understood that the Officer expected Lewis to maintain this 

information’s confidentiality.   

6. In breach of his duty of trust and confidence, Lewis then tipped Carter, O’Connor, 

and Waugh this inside information about Issuer B.  Within days of the Officer learning this 

information, Carter and then later O’Connor and Waugh purchased Issuer B’s common stock 

based on that tip.   

7. Together, these three tippees bought over $3 million worth of Issuer B’s stock.  

And in O’Connor and Waugh’s case, each used a $500,000 loan extended by Lewis to execute 

the trades.  To execute some of his trades, O’Connor used a brokerage account held by his wife, 

Jean J. O’Connor.  The day after Issuer B announced positive data from its clinical trial at the 

October Biotech Conference, its share price increased by 16.7%, and Carter, O’Connor, and 

Waugh together profited by over $373,000. 

VIOLATIONS 
 

8. By virtue of the foregoing conduct and as alleged further herein, Defendants 

violated U.S. insider trading prohibitions, in particular, Section 10(b) of the Securities Exchange 

 
1 The conference name has been anonymized in this Complaint. 

Case 1:23-cv-06438   Document 1   Filed 07/26/23   Page 3 of 31



4 
 

Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. 

§ 240.10b-5]. 

9. Unless Defendants are restrained and enjoined, they will engage in the acts, 

practices, transactions, and courses of business set forth in this Complaint or in acts, practices, 

transactions, and courses of business of similar type and object.  

NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 
 

10. The Commission brings this action pursuant to authority conferred upon it by 

Sections 21A of Exchange Act [15 U.S.C. § 78u-1]. 

11. The Commission seeks a final judgment: (a) permanently restraining and 

enjoining Defendants from violating the federal securities laws and rules this Complaint alleges 

they violated; (b) ordering Defendants and the Relief Defendant to disgorge any ill-gotten gains 

they received as a result of the violations alleged here and to pay prejudgment interest thereon 

pursuant to Exchange Act Section 21(d)(3), 21(d)(5) and 21(d)(7) [15 U.S.C. §§ 78u(d)(3), (d)(5) 

and 78u(d)(7)]; (c) ordering Defendants to pay civil money penalties pursuant to Exchange Act 

Section 21A [15 U.S.C. § 78u-1]; and (d) ordering any other further relief that the Court may 

deem just and proper.  

JURISDICTION AND VENUE 
 

12. This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), 21A, 

and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), 78u-1, and 78aa]. 

13. Defendants, directly and indirectly, made use of the means or instrumentalities of 

interstate commerce or of the mails in connection with the transactions, acts, practices, and 

courses of business alleged herein. 

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5 
 

14. Venue is proper in the Southern District of New York pursuant to Section 27 of 

the Exchange Act [15 U.S.C. § 78aa(a)].  More specifically, certain of the transactions, acts, 

practices, and courses of business constituting the violations alleged herein occurred within the 

Southern District of New York and elsewhere, and were effected, directly or indirectly, by 

making use of the means, instruments, or instrumentalities of transportation or communication in 

interstate commerce, or of the mails, or the facilities of a national securities exchange.  As 

detailed below, orders and executions of securities transactions described herein involved 

securities listed on stock exchanges located within this District, and the Defendants also used 

correspondent banks in this District to clear U.S. dollar transfers that they initiated as part of 

their unlawful schemes. 

DEFENDANTS 

15. Joseph C. Lewis, age 86, is a British citizen who resides principally in The 

Bahamas.  He is the ultimate majority owner of the Fund, and is the sole indirect owner, 

president, and a director of the Fund’s manager, “Fund Management Inc.” 

16. Carolyn W. Carter, age 33, is a U.S. citizen who resides in the U.S. Virgin 

Islands.  Carter and Lewis were in a romantic relationship from approximately 2013 to 2020.   

17. Patrick J. O’Connor, age 66, is a U.S. citizen who resides in New York.  

O’Connor is one of Lewis’ private jet pilots. 

18. Bryan L. Waugh (a/k/a Marty Waugh), age 64, is a U.S. citizen who resides in 

Virginia.  Waugh is one of Lewis’ private jet pilots.   

RELIEF DEFENDANT 

19. Jean J. O’Connor, age 66, is a U.S. citizen who resides in New York.  She is 

Patrick O’Connor’s wife.  Patrick O’Connor’s unlawful trading activity was conducted, in part, 

through a brokerage account held by Jean J. O’Connor. 

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6 
 

RELEVANT ENTITIES2 

20. Investment Group is Lewis’ private investment organization, which has 

investments in over 200 operating companies.  Its principal place of business is in Florida. 

21. The Fund is a Delaware limited liability company with its principal place of 

business in California.  The Fund’s limited liability company manager is Fund Management Inc. 

22. Fund Management Inc. is a Bahamian company with its principal place of 

business in The Bahamas.  It is the manager of the Fund.  At all relevant times in this Complaint, 

Lewis was the sole indirect owner, president, and a director of Fund Management Inc. 

23. Issuer A is a Delaware corporation with its principal place of business in 

Massachusetts.  Shares of its common stock are registered with the Commission pursuant to 

Section 12(b) of the Exchange Act and trade on the Nasdaq Global Select Market, which is 

located in this District.   

24. Issuer B is a Delaware corporation with its principal place of business in 

California.  Shares of its common stock are registered with the Commission pursuant to Section 

12(b) of the Exchange Act and trade on The Nasdaq Stock Market LLC, which is located in this 

District.   

TERM USED IN THIS COMPLAINT 

25. PIPE Offering:  Private Investment in Public Equity (“PIPE”) refers to the 

private placement of securities of an already public company, typically offered to a limited group 

of institutional accredited investors.  The public company typically allows potential PIPE 

investors to view material nonpublic information before deciding whether to invest.  This 

 
2 The entities’ names have been anonymized in this Complaint. 

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7 
 

requires the potential investor to agree to maintain the confidentiality of information shared by 

the company and to cease or restrict the investor’s trading in the company’s securities. 

FACTS 

I. Lewis was Entrusted with Material Nonpublic Information and Knew That He Had 
a Duty to Maintain its Confidentiality 

26. Lewis is the founder of and principal investor in Investment Group, a firm that 

invests in operating companies around the world.  At all relevant times, Lewis had a substantial 

investment in the Fund, which he helped found in 2005 with an investment of approximately 

$5.7 million, and which is held out as being a part of Investment Group.  By the end of June 

2019, the Fund held assets exceeding $1 billion, and it had major equity investments in dozens of 

publicly traded biotechnology companies. 

27. From no later than February 28, 2017 through at least October 29, 2019, Lewis 

was president, treasurer, secretary, and a director of Fund Management Inc., in addition to being 

its sole indirect owner.  Because Fund Management Inc. owned a majority of the Fund’s 

membership interests and was also the Fund’s manager under its limited liability company 

operating agreement, Lewis had ultimate control over the Fund.  Moreover, Fund Management 

Inc., including Lewis and its other officers and directors, owed a duty of trust and confidence to 

the Fund and its other shareholders. 

28. Due to its major investments in biotechnology companies, the Fund sometimes 

had a contractual right to appoint members of certain public companies’ boards of directors.  In 

these director roles, the Fund’s officers received material nonpublic information about these 

companies.  The Fund was also invited to participate in PIPE offerings of certain public 

companies, which allowed its officers to review the public companies’ material nonpublic 

information pursuant to confidentiality agreements. 

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29. Due to his role with the Fund, Lewis was often privy to material nonpublic 

information.  Further, officers of the Fund also shared with Lewis material nonpublic 

information they learned as public company directors or pursuant to PIPE offerings.  In these 

situations, Lewis typically owed a duty of trust and confidence to the source of the information, 

including as a result of a confidentiality agreement between the Fund and the company, and/or he 

owed a duty of trust and confidence to the officer of the Fund who shared material nonpublic 

information with him in confidence. 

30. Further, Lewis was well aware of his duties of trust and confidence.  Indeed, the 

Officer informed Lewis on numerous occasions prior to July 2019 that Lewis was not to share 

any material nonpublic information that he learned from the Fund’s officers.  The Officer also 

directed Lewis to first inform the Fund prior to purchasing or selling equity securities (stock) in 

biotechnology companies because the Fund could have material nonpublic information about the 

biotechnology company whose stock Lewis wished to trade. 

31. Lewis never challenged or questioned the Officer’s warnings about not sharing 

material nonpublic information, nor did he indicate that he misunderstood them.  Indeed, Lewis’ 

personal trader, who bought and sold equity securities and other financial assets for Lewis and 

Lewis-controlled entities, gave the appearance of honoring the Officer’s request to Lewis by 

frequently informing the Fund’s officers and employees of biotechnology securities that Lewis 

wished to trade.  Despite the Officer’s warnings about Lewis’ duty of confidentiality, Lewis 

chose to breach his duty when he tipped material nonpublic information obtained from the 

Officer about Issuers A and B to the other Defendants.  As further explained below, on each 

occasion, Lewis knew, consciously avoided knowing, or was reckless in not knowing the 

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information he communicated to Carter, O’Connor, and Waugh was material and nonpublic, and 

that his communications breached his duty of trust and confidence.   

II. Lewis Illegally Tipped Material Nonpublic Information about Issuer A to Carter, 
Which Carter then Illegally Traded Upon 

A. Lewis and Carter Had a Close Personal Relationship, Which Made Carter Aware 
That Lewis Was Entrusted with Material Nonpublic Information  

 
32. Lewis and Carter were in a close romantic relationship from approximately 2013 

to 2020.  Carter moved in with Lewis in 2015 or 2016.  He frequently gave her gifts, including 

cash transfers amounting to approximately $100,000 per year.   

33. Lewis also took an active interest in Carter’s investing.  Indeed, Lewis provided 

Carter with the funds that she used to open an account with Broker 1 in November 2016.  He 

then often guided Carter’s investment strategy.  For instance, he encouraged Carter’s first trade 

on March 15, 2017, which was the purchase of a biotechnology stock.  And between her first 

trade in March 2017 and the end of October 2019, Carter only ever traded in stocks in which the 

Fund and/or Lewis had invested.  Indeed, Carter sometimes emailed Lewis when one of these 

companies—including Issuer B—did particularly well or poorly on a given trading day.   

34. Lewis also kept Carter informed about companies in which the Fund had invested.  

In particular, from no later than April 2017 through at least April 2020, Lewis often forwarded 

and directed the forwarding of confidential emails and attachments to Carter, including the 

Fund’s portfolio statements and confidential analyses of companies in its investment portfolio.  

These portfolio statements showed all of the companies in which the Fund was invested, 

including the number of shares and percentage of each company that the Fund owned.  Lewis 

shared these statements with Carter, even though the Officer had told him they were confidential 

and must not be shared.   

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35. Many of the emails and attachments that Lewis forwarded or directed be 

forwarded to Carter included confidentiality markings, such as “CONFIDENTIAL | NOT FOR 

DISTRIBUTION” and “This email message is for the sole use of the intended recipient(s) and 

may contain confidential information.”  Lewis and those acting at his direction never copied the 

Officer nor any other officers or employees of the Fund when forwarding these materials to 

Carter.   

36. Further, because Lewis and Carter were romantically involved, she was regularly 

with Lewis on his yacht and elsewhere.  Over the years, Carter was present when Lewis met with 

the Fund’s officers, including the Officer, and biotechnology company executives.   

37. Thus, Carter knew, was reckless in not knowing, or consciously avoided knowing 

that Lewis’ role at the Fund meant he was entrusted with material nonpublic information. 

B. Lewis Tipped Material Nonpublic Information about Issuer A to Carter, Which 
Carter Then Traded Upon 

 
38. In 2019, Lewis tipped material nonpublic information to Carter on at least two 

occasions.   

39. On the first occasion, on or about July 18, 2019, an investment banker for Issuer 

A informed the Officer that Issuer A intended to conduct a PIPE offering and asked if the Fund 

wished to participate.  As part of the PIPE offering, Issuer A would share nonpublic information 

with the Fund before the Fund decided whether to invest.  The next day, the Fund entered into a 

confidentiality agreement with respect to the PIPE offering (“PIPE Confidentiality Agreement”), 

which prohibited the Fund, including its “affiliates, directors, officers, employees, agents or 

advisors,” from sharing the existence or terms of the PIPE offering.  As president, director, and 

sole indirect owner of the Fund’s manager, Lewis was bound by this confidentiality agreement. 

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40. Lewis learned of Issuer A’s PIPE offering no later than July 25, 2019, when he 

and Carter were staying at a luxury hotel in South Korea.  The Officer informed Lewis via email 

of Issuer A’s PIPE offering and the Fund’s allocation therein.  

41. The Officer had specifically counseled Lewis in the past to treat as confidential 

any nonpublic information concerning issuers’ financing events.  Accordingly, Lewis knew, 

consciously avoided knowing, or was reckless in not knowing that he had a duty of trust and 

confidence as to the PIPE offering, and that the offering’s existence constituted material 

nonpublic information.   

42. Lewis also knew that the Fund had signed confidentiality agreements in 

connection with prior issuer financings, and that he had been bound by those agreements as an 

officer and director of the Fund’s manager.  Therefore, Lewis either knew, consciously avoided 

knowing, or was reckless in not knowing that he had a duty of trust and confidence regarding the 

PIPE offering. 

43. On July 25, 2019, approximately seven hours after Lewis received the Officer’s 

email, Carter emailed Lewis to suggest they get room service for dinner, and that she come to his 

hotel room.  Three hours after they were scheduled to meet in Lewis’ hotel room, Carter made a 

purchase order for 150,000 shares of Issuer A at a price of $700,673.23, or approximately $4.67 

per share.  

44. During their evening meeting, Lewis tipped Carter material nonpublic information 

regarding the PIPE offering for personal benefit, including the benefit of making a gift of 

material nonpublic information to his girlfriend.  Lewis also knew, consciously avoided 

knowing, or was reckless in not knowing that the information he communicated to Carter about 

the PIPE offering would be used for trading. 

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45. After Carter traded on the material nonpublic information provided by Lewis,

99% of her brokerage account value was invested in Issuer A.  Further, prior to this trade, Carter 

had never traded in Issuer A, and she has not traded in it since selling her 150,000 Issuer A 

shares in September 2019. 

46. The next day, Issuer A announced a $60 million private placement in which

several institutional investors, including the Fund, participated.  That day, Issuer A closed at 

$5.82 per share—approximately 34.4% higher than the previous day’s close of $4.33 pershare.  

Its trade volume on the first trading day after the announcement was approximately 6.66 times 

higher than its 15-day simple moving average trade volume.   

47. When Carter sold her Issuer A shares in September 2019, she realized a profit of

approximately $172,326 from the July 26, 2019 price increase.  Her total profit was 

approximately $888,775, due to Issuer A share price movements that took place after July 26, 

2019. 

48. Carter knew, consciously avoided knowing, or was reckless in not knowing that

the PIPE offering was material nonpublic information, and she used this information to trade in 

Issuer A.  First, and most importantly, she knew, consciously avoided knowing, or was reckless 

in not knowing that Lewis had this information because of the Fund’s ownership interest in 

Issuer A.  More specifically, earlier that same month, Carter received the Fund’s portfolio 

statement, which indicated that the Fund owned approximately 9.9% of Issuer A.  Second, Carter 

was aware that PIPE offerings had a positive impact on biotechnology companies because she 

had previously purchased shares of a biotechnology company (Issuer B) just prior to a PIPE 

offering, and those shares also saw a substantial increase in value just after the offering’s 

announcement.  Third, Carter’s unusual trading activity and the commitment of 99% of her 

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brokerage account assets to this investment indicate she knew the importance of this information 

to the market.   

49. Finally, Carter knew, consciously avoided knowing, or was reckless in not 

knowing that Lewis breached a duty of trust and confidence for personal benefit by providing her 

with information about the PIPE offering.  First, Carter was aware of Lewis’ high-level role in 

the Fund and she had been been privy to numerous emails from Lewis containing information 

marked as confidential.  Second, she also knew of Lewis’ major investment in Issuer A through 

the Fund, and that Lewis often met with executives of companies in which he invested.  And as 

Lewis’s direct tippee, Carter was of course aware of the personal benefit Lewis received from 

giving her—his romantic partner—a gift of inside information about the PIPE offering.     

III. Lewis Illegally Tipped Material Nonpublic Information About Issuer B to Carter, 
O’Connor, and Waugh, Which They Each Then Illegally Traded Upon  

50. A few weeks after Lewis breached his duties of trust and confidence to Issuer A 

and the Officer by illegally tipping Carter, Lewis did it again—but this time, he illegally tipped 

not just Carter but also his longtime private pilots, O’Connor and Waugh.  All three Defendants 

took advantage of material nonpublic information provided by Lewis concerning Issuer B, and 

together profited by over $373,000. 

A. The Officer Provided Material Nonpublic Information about Issuer B to Lewis 
Pursuant to Their Longstanding Relationship of Trust and Confidence 
 

51. In August 2019, the Officer, who was a member of Issuer B’s board of directors, 

emailed Lewis his view that Issuer B’s share price would remain between $80 and $120 until it 

publicized clinical trial data showing that it could be competitive with another biotechnology 

company that was developing a similar trial drug. 

52. In September 2019, the Officer learned that a patient in a clinical cancer trial had 

experienced positive results from Issuer B’s trial drug.  On September 11, 2019, for instance, 

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Issuer B’s CEO emailed the Officer and other board members that one patient had experienced a 

“PR”—a partial response, meaning that the patient’s tumor had shrunk by over 30% after being 

dosed with the trial drug.  The Officer responded minutes later:  “Great initial read at that dose!”  

Other board members responded “Agree!” and “Great news, [CEO].”   

53. Then, on September 17, 2019, Issuer B’s CEO emailed the Officer a scan showing 

a clear and dramatic shrinkage of the trial patient’s tumor, along with the message, “Test your 

radiological skills on this one. . . .  Obviously also had dramatic symptom improvement.”  In this 

same email, the CEO also suggested presenting clinical data at the October Biotech Conference.  

As a member of the board of directors, the Officer owed a duty of trust and confidence to Issuer 

B with respect to this and other information he received in that capacity. 

54. The Officer was a guest aboard Lewis’ yacht from September 11 to 13, and again 

from September 15 to 18, 2019, when the Officer learned of the confidential positive news about 

Issuer B’s clinical trial results for its cancer drug.  And shortly after the Officer received the 

email from Issuer B’s CEO on September 11, the Officer had dinner with Lewis and another 

Investment Group officer aboard the yacht.  At the dinner, all three were optimistic about Issuer 

B’s future and the prospects for its cancer drug.  During the dinner, Lewis and/or the Investment 

Group officer suggested Issuer B’s share price, which had generally been trading between $80 

and $90 for the previous two weeks, might trade up to the mid-100s.  The Officer responded by 

stating that the share price might rise to over $200, which was well above the $80 to $120 range 

in the Officer’s August 2019 email to Lewis.  At the dinner, the Officer conveyed material 

nonpublic information about Issuer B’s clinical trial to Lewis.  Either that night or later that 

week, the Officer and Lewis also discussed the possibility that Issuer B would present results 

from its trial at the October Biotech Conference.  Lewis knew, based on prior conversations with 

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the Officer, that the Officer would urge Issuer B to present trial results only if the data were 

positive. 

55. Additionally, Lewis and the Officer were both aboard Lewis’ yacht on September 

17, 2019, after Issuer B’s CEO had earlier that day emailed the Officer about the trial patient’s 

tumor size reduction and suggested presenting clinical data at the October Biotech Conference. 

56. When the Officer shared confidential and material nonpublic information with 

Lewis, Lewis knew that the Officer was a member of Issuer B’s board of directors and that the 

Officer was entrusted with inside information because of the Officer’s role.  Further, Lewis also 

knew that the Officer had for years shared inside information with Lewis because of Lewis’ role 

with the Fund and Lewis’ associated duty of trust and confidence to both the Fund, including 

information about the Fund and the issuers in which the Fund invested, and to the Officer.  

Indeed, the Officer had on numerous occasions informed Lewis that Lewis was not to share any 

material nonpublic information that he learned from the Officer and other officers of the Fund 

about any issuer in which the Fund invested.  Lewis and the Officer had a history, pattern, or 

practice of sharing confidences, such that the Officer expected Lewis to maintain this 

information’s confidentiality, and Lewis was aware that the Officer expected Lewis to maintain 

this information’s confidentiality.  Therefore, Lewis either knew, consciously avoided knowing, 

or was reckless in not knowing that he had a duty of trust and confidence to the Officer with 

respect to any such information.   

57. Moreover, based on Lewis’ previous investments in biotechnology companies, 

Lewis was aware that share prices often increased after a company announced positive clinical 

results.  And Lewis was aware that these clinical results had not been publicly announced.  Thus, 

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Lewis knew, consciously avoided knowing, or was reckless in not knowing that the Officer’s 

statements to him about Issuer B constituted material nonpublic information.   

B. Lewis Tipped Carter with Material Nonpublic Information About Issuer B and 
Carter Traded on that Information 

 
58. Shortly after Lewis’ meetings with the Officer aboard his yacht, Lewis tipped 

Carter with the material nonpublic information about Issuer B that he had learned from the 

Officer.  In so doing, he violated his duty of trust and confidence to the Officer.  Lewis tipped 

Carter for personal benefit, including the benefit of making a gift of material nonpublic 

information to his girlfriend.  Lewis also knew, consciously avoided knowing, or was reckless in 

not knowing that the information he communicated to Carter about Issuer B and the positive 

clinical trials would be used for trading. 

59. Indeed, on September 17, 2019, approximately 90 minutes after the Officer 

received the second email from Issuer B’s CEO, Carter entered a note on her phone, which she 

subsequently modified on September 19: 

“Sell at 15% at the volume until 150,000 shares are sold” - call Joe after the 
[Broker 1] call 
10,360 volume 
@ $10.50 
Done @1:45pm in a perfect world 
I have an order to sell @15% of the volume 
I would like to change it to 25% of the volume 
With a $9.50 low 
125K 
[Issuer B]: buy at 15% of the volume, cap @$90.00 
[Issuer A]: sell at 15% of the volume, low @$9:50 

In Carter’s notes, “Joe” was a reference to Lewis.  “Broker 1” was the name of the brokerage 

where Carter held an account. 

60. On September 18, Carter logged into her Broker 1 electronic account portal, 

called Broker 1, and asked to sell all Issuer A shares in her account.  She told the Broker 1 

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representative, “I’d like to do 15% of the volume until everything is sold.”  She was advised to 

call back about 30 minutes later when the market was open.  She did so while simultaneously 

logged into her Broker 1 account portal, and repeated over the phone that she wished to sell her 

Issuer A shares, adding “I’d like to trade 15% of the volume until all 150,000 shares are sold.” 

61. Carter’s request to sell her shares at 15% of the daily trade volume of Issuer A is a

strategy sometimes used by sophisticated investors to sell large quantities of securities with 

minimal or no reduction in the securities’ sale price.   

62. Consistent with the note in her phone, Carter later asked Broker 1 to change her

sale order from 15% to 25% of the daily trade volume. 

63. Broker 1 complied with Carter’s trade order, and began selling Carter’s 150,000

Issuer A shares shortly after the market opened on September 18.  Several minutes after Broker 1 

began executing Carter’s Issuer A trade order, she emailed Lewis:  “Good morning!  All good & 

all confirmed.” 

64. The last of Carter’s Issuer A share sales were completed shortly before market

close on September 19.  Her total proceeds from these sales was approximately $1,551,856. 

Carter used the bulk of her sale proceeds—approximately $1,449,330—to buy shares of Issuer B 

from September 19 to 20, 2019.  As with her Issuer A sales, she followed Lewis’ instructions to 

conduct a market volume purchase of Issuer B shares.  On September 25, Carter bought an 

additional $17,700 worth of Issuer B shares. 

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65. On September 30, 2019, Carter called Broker 1 to ask whether she could buy 

Issuer B shares on margin.3  Carter, however, was told by a Broker 1 representative that Issuer B 

shares were effectively excluded from margin trading. 

66. Undeterred, Carter bought approximately $23,781 worth of Issuer B stock on 

September 30 using money she had transferred to her brokerage account three days earlier.  By 

this time, Carter had spent approximately $1,490,811 purchasing Issuer B stock—over 99% of 

her brokerage account value and a significant portion of her overall net worth. 

67. When Carter executed her trades using information received from Lewis, she 

knew, consciously avoided knowing, or was reckless in not knowing that the information about 

Issuer B and the positive clinical trials was material and nonpublic, and that Lewis breached a 

duty of trust and confidence for personal benefit when he provided her with material nonpublic 

information.  First, Carter had just a few weeks prior illegally purchased Issuer A stock under 

similar circumstances.  Second, she also, in the past, purchased Issuer B’s stock on three separate 

occasions just prior to the release of information resulting in a rise in Issuer B’s stock price.  

Thus, Carter understood the impact that positive press releases can have on Issuer B’s stock price 

when released.  Third, the timing, unusual trading, and the extent of Carter’s investment in Issuer 

B reflects that she knew the importance of the information Lewis provided to her.  Finally, Carter 

knew that Lewis was essentially the Officer’s employer, that Lewis frequently received 

significant information about various issuers from the Officer, that the Officer was on Issuer B’s 

board of directors, and that Lewis frequently forwarded to Carter confidential emails and 

 
3 Buying shares on margin means that an account holder borrows money from the brokerage, 
which then uses the money to conduct the stock purchase.  The account holder must pay back the 
margin loan whether the share price increases or decreases, making this a risky method of 
funding stock trading. 

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attachments he had received from the Officer.  And as Lewis’s direct tippee, Carter was of 

course aware of the personal benefit Lewis received from giving her—his romantic partner—a 

gift of inside information about Issuer B and the positive clinical trials.     

C. Lewis Tipped O’Connor and Waugh with Material Nonpublic Information About 
Issuer B  

 
68. A few weeks after learning material nonpublic information about Issuer B from 

the Officer, Lewis tipped his longtime private pilots, O’Connor and Waugh, with this 

information.  In so doing, he violated his duty of trust and confidence to the Officer.  Lewis 

tipped O’Connor and Waugh for personal benefit as a gift and/or as part of a quid pro quo for 

direct or indirect pecuniary gain as a substitute for providing a formal retirement plan for his 

pilots.  Lewis also knew, consciously avoided knowing, or was reckless in not knowing that the 

information he communicated to O’Connor and Waugh about Issuer B would be used for 

trading. 

i. Lewis was committed to helping O’Connor and Waugh with their investments 
 

69. O’Connor and Waugh began working as Lewis’ private jet pilots in 2005 and 

2001, respectively.   

70. Starting no later than November 2016, Lewis began providing investment advice 

to both O’Connor and Waugh.  Lewis had numerous and sometimes lengthy conversations with 

O’Connor and Waugh concerning stock trading, and they acted on his advice.  For example, at 

the end of October 2016, Lewis invited O’Connor and Waugh to speak with him about 

companies to invest in.  Following this conversation, O’Connor and Waugh reported to Lewis’ 

assistant the dollar amounts they wished to invest in specific companies.  And in December 

2016, a company controlled by Lewis loaned O’Connor and Waugh $80,000 and $50,000, 

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respectively.  At the end of December 2016, O’Connor and Waugh invested $48,675.25 and 

$18,766.86, respectively, in the companies Lewis had recommended, including Issuer B. 

71. Lewis’ investment advice to O’Connor and Waugh continued for years.  In

numerous WhatsApp messages written between 2017 and 2020, O’Connor described the 

investment advice he and Waugh received from Lewis, which frequently included Lewis’ 

recommendations to buy specific stocks at specific times. 

72. One such stock included an Australian company of which Lewis owned over

40%.  Although Lewis had recommended in or about October 2018 that O’Connor and Waugh 

buy stock in this company, it suffered a setback in early 2019.  After Lewis’ board appointees at 

this company contacted Lewis to inform him of this information, and just hours after a board 

meeting concerning a planned press release about the setback, Lewis called O’Connor and 

O’Connor immediately attempted to sell all his shares.  However, O’Connor was unable to sell 

his shares before the company issued a press release about the setback, which was followed by a 

stock price drop.  Further, approximately thirty minutes after the call, Waugh too attempted to 

sell his shares, but also failed to avoid the stock price drop.  O’Connor’s encrypted 

communications confirm that he believed Lewis provided him material and nonpublic 

information with the expectation that O’Connor would sell his shares in the company.   

73. In addition to providing investment advice and confidential information to

O’Connor and Waugh, Lewis also provided them with financial assistance.  On at least twelve 

occasions from 2013 to 2019, Lewis loaned five- and six-figure sums to them, which often 

funded their stock trading.  These were frequently “non-recourse” loans, meaning that the lender 

could not take legal action to seek repayment if the borrower defaulted. 

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21 

74. According to Waugh, Lewis provided the foregoing assistance to him and

O’Connor, in part, to make up for their lack of a formal retirement plan through their employer, 

which was a part of Investment Group. 

75. Further, in addition to their investment conversations with Lewis, O’Connor and

Waugh also frequently emailed each other about stocks, including the stocks that Lewis had 

discussed with them.  In their jobs as private jet pilots, O’Connor and Waugh typically traveled 

about 200 days per year, during which they flew together.  Their flights were often hours long, 

giving them ample opportunity to speak with each other about investing and other topics. 

ii. Lewis provided material nonpublic information about Issuer B to O’Connor
and Waugh

76. O’Connor and Waugh flew Lewis from San Diego, California, to The Bahamas

on October 10, 2019.  During that flight, Lewis tipped O’Connor and Waugh the material 

nonpublic information about Issuer B that he had learned from the Officer the previous month.  

77. Later that same evening, after receiving the tip from Lewis, O’Connor emailed to

request that Broker 2 “place a buy order for [Issuer B] at market value” and that there was 

“[m]ore money coming your way next week to invest in [Issuer B].”  By the following day, 

O’Connor had purchased $204,080 worth of Issuer B stock. 

78. Just two minutes after emailing his broker at Broker 2, O’Connor entered an order

to sell all shares of Issuer A in the Broker 3 account of his wife, Jean J. O’Connor.  Five minutes 

later, Patrick O’Connor entered an order to sell all his shares of Issuer A in his and Jean J. 

O’Connor’s joint account with Broker 4.  The shares in both accounts were sold the following 

morning for total proceeds of approximately $114,720.  Shortly afterwards, O’Connor entered an 

order with Broker 3 to buy another approximately $103,289 worth of Issuer B shares, and a 

separate order with Broker 4 to buy approximately $7,594 worth of Issuer B shares. 

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22 

79. Further, also on the evening of October 10, O’Connor messaged an acquaintance,

“Individual 1,” via an encrypted mobile app.  He wrote that he had spoken with Lewis earlier 

that day, and he then advised Individual 1 to sell all of his shares of Issuer A and “buy as much 

[Issuer B] as you can.”  They continued: 

O’CONNOR:  Spoke to boss today in length 
INDIVIDUAL 1: Ok, [Issuer A] is done… 
O’CONNOR: No. [Issuer A] not done but we will make much more 

within the next 6 weeks with [Issuer B]. 
INDIVIDUAL 1: Ok, understood 
O’CONNOR:   Boss said he really really likes [Issuer B] right now.   

Think we have people who know 
Get it done amigo. 

* * *
         INDIVIDUAL 1: Thanks for advice me Amigo! [sic] 

O’CONNOR:  No worries amigo.  
Boss said to bug him more.  
He forgets about us 
Today he approached me though so this is another goodie. 

This six-week timeframe O’Connor mentioned in his message encompassed the October Biotech 

Conference. 

80. Several days later, O’Connor again messaged with Individual 1 via an encrypted

mobile app: 

O’CONNOR:  You okay with [Issuer B]  
Boss is helping us out and told us to get ASAP 

INDIVIDUAL 1: 👏👏👏👏👏👏👏👏4

Put big money last friday 
O’CONNOR:  Perfect 

All conversation on app is encrypted so all good. 
No one can ever see 

4 We note the emojis used in the conversation have a slightly different appearance in the messaging application that 
was used. 

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23 

81. Waugh also moved quickly on Lewis’ tip, placing an order with Broker 2 to buy

$88,010 worth of Issuer B shares on October 11, 2019, the day after he flew Lewis to The 

Bahamas. 

82. On October 13, 2019, Lewis’ executive assistant emailed bank wire instructions.

Two of the instructions were for a transfers of $500,000 each to O’Connor and Waugh.  In her 

transmittal email, Lewis’ assistant described these as “Loan to Patrick and Marty as discussed on 

the flight over on Thursday.”  Lewis signed the bank wire instructions himself. 

83. A few days later, on October 15, 2019, $500,000 was wired into O’Connor’s

account at a bank based in New York and $500,000 into Waugh’s account at a bank based in 

North Carolina, both from an account controlled by Lewis at a Switzerland-based financial 

institution.  These bank wires were transferred through a correspondent bank in this District.  On 

that same day, O’Connor used the encrypted mobile app to inform Individual 1 that Lewis said to 

buy Issuer B stock, but that Issuer B “should only be short term,” and that the “Boss mentioned 

around 6 to 8 weeks for [Issuer B] to take profit.”   

84. And on October 16, 2019, Waugh’s broker entered a client call note:  “[Waugh]

called me yesterday and told me to transfer in $250,000 from his [bank] account to his brokerage 

account and us[e] it to purchase as many share of [Issuer B] as possible.  I inputted the transfer 

and will make the trade this morning.”  That day, Waugh’s account with Broker 2 bought 

approximately $250,494 worth of Issuer B stock. 

85. The morning of October 17, 2019, Issuer B announced that it would take part in

the October Biotech Conference.  That day, Issuer B’s share price closed approximately 8.3% 

above the previous day’s closing price.  A little over a week later, on October 25, Waugh sold 

some Issuer B shares in his Broker 2 account for a net profit of approximately $3,409. 

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24 

86. On October 21, 2019, Waugh sold shares of Issuer A for approximately $139,240

and used the sale proceeds to fund his purchase of more Issuer B stock.  On October 25, 2019, 

Waugh sold shares of an index fund for approximately $99,766 and used the sale proceeds to 

fund his purchase of more Issuer B stock. 

87. Then, on October 22, 2019, O’Connor again messaged Individual 1 via an

encrypted mobile app:  “28th is a big day for [Issuer B]”.  O’Connor was referring to the October 

Biotech Conference, which was held on October 28, 2019, and is when Issuer B first announced 

data from its clinical trial.  The encrypted conversation continued: 

O’CONNOR: Think the Boss has inside info. Otherwise why would he 
make us invest. 

* * *

INDIVIDUAL 1: What’s your target price to sell? 
O’CONNOR:  Not sure.  

Well over $100  
52 week high I think is $112 

INDIVIDUAL 1: Yes... 
O’CONNOR:  No worries.  

We won’t dump on the 28th.  
You can relax. 

* * *

O’CONNOR: Boss lent [Waugh] and I $500,000 each for this. [I’m] 
pretty sure he knows the outcome 

INDIVIDUAL 1: Wow!!!! 
He really loves you! 

O’CONNOR:  He told me to buy 
And asked if I had spare cash 
I said all invested and I need him. 
I was like a little puppy looking up at him.  He couldn’t 
refuse 
[Waugh] just holds on and says I got big balls 

* * *

INDIVIDUAL 1: He must be sure you will make good money, or at least 
dont loose all [sic] 

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O’CONNOR:  BINGO. 

88. On October 26, 2019, O’Connor emailed Waugh a link to Issuer B’s press release 

that it would be presenting clinical data at the October Biotech Conference. 

89. From the time of their October 10 flight with Lewis until October 27, 2019—the 

day before Issuer B announced its clinical data at the October Biotech Conference—O’Connor 

bought approximately $819,531 worth of Issuer B stock and Waugh bought approximately 

$761,527 worth of Issuer B stock.  This represented several years’ worth of salary for both pilots. 

90. As to their Issuer B stock purchases through Broker 2, O’Connor and Waugh both 

entered stop-loss orders, which is a risk-mitigation mechanism that would cause their Issuer B 

stock to be sold automatically if its share price fell below a certain price.  On October 28, 2019, 

the stop-loss order was triggered in both O’Connor’s and Waugh’s accounts when Issuer B’s 

share price temporarily fell below approximately $79.00 several minutes after markets opened.  

Thus, all the Issuer B shares in O’Connor’s Broker 2 account were sold at an average price of 

approximately $76.74 per share, and all Issuer B shares in Waugh’s Broker 2 accounts were sold 

at an average price of approximately $76.28 per share. 

91. Within several hours of the stop-loss orders being triggered, both O’Connor and 

Waugh had used all or almost all the proceeds from their stop-loss sales to repurchase Issuer B 

shares.  This was several hours before Issuer B made its announcement of clinical data. 

92. When they purchased Issuer B stock between October 10 and October 28, 2019, 

O’Connor and Waugh both knew that Lewis controlled Investment Group, and that 

representatives of Investment Group sat on Issuer B’s board of directors.  For instance, on 

January 10, 2018, Waugh sent O’Connor an email with a subject line that included Issuer B’s 

stock ticker symbol:  “Looks like two [Investment Group] guys are on the board.”  He emailed 

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O’Connor later the same day:  “Also wonder what the boss thinks about reinvesting in [Issuer 

B].”  And as both were directly tipped by Lewis, O’Connor and Waugh were of course aware of 

the personal benefit Lewis received from gifting them this inside information, as well as their 

quid pro quo of communicating inside information to his pilots as a substitute to providing them 

a formal retirement plan.  Accordingly, both O’Connor and Waugh knew, consciously avoided 

knowing, or were reckless in not knowing that the information Lewis provided them had been 

obtained in breach of a duty of trust and confidence for personal benefit. 

93. Moreover, the timing, unusual trading, and the extent of O’Connor and Waugh’s 

investments in Issuer B reflects that both knew, consciously avoided knowing, or were reckless 

in not knowing that the information to be contained in Issuer B’s announcement, which would 

positively affect the stock price, was material nonpublic information, and that they used this 

information to trade in Issuer B.  Further, O’Connor, in his messages above, explicitly 

recognized the inside nature of the information when he stated “Think the Boss has inside info. 

Otherwise why would he make us invest.”  He also recognized that his communications 

concerned illegal activity, when he stated “All conversation on app is encrypted so all good. No 

one can ever see.”  Finally, both O’Connor and Waugh had previously attempted to use their 

prior knowledge of confidential information provided by Lewis to avoid losses in their 

Australian investment.  Both therefore understood the impact important material and nonpublic 

information can have on share prices, when disclosed publicly.  

94. After stock markets closed on October 28, 2019, Issuer B announced positive data 

from the clinical trial of its principal experimental cancer therapy at the October Biotech 

Conference.  The following day, Issuer B’s share price closed at $95.10—approximately 16.7% 

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27 
 

higher than the previous day’s closing price—and traded on volume exceeding 3.53 times its 15-

day simple moving average trade volume. 

95. In November 2019, both O’Connor and Waugh repaid Lewis the principal amount 

on their $500,000 loans, but without interest.  Waugh emailed Lewis’ assistant a receipt showing 

the transfer of funds back to Lewis; the file name he gave to the receipt was “500000 loan 

payback for [Issuer B].pdf.” 

96. From November 1 to December 6, 2019, Carter sold 16,400 shares of Issuer B for 

proceeds of $1,707,904, realizing a net profit of $217,092.  Of this net profit, $68,828 is 

attributable to the share price increase immediately following Issuer B’s announcement on 

October 28, 2019. 

97. From November 1 to November 8, 2019, O’Connor sold 10,425 shares of Issuer B 

for proceeds of $1,046,577, realizing a net profit of $227,060.  Of this net profit, $171,886 is 

attributable to the share price increase immediately following Issuer B’s announcement on 

October 28, 2019. 

98. From October 28 to November 11, 2019, Waugh sold 9,380 shares of Issuer B for 

proceeds of $925,672, realizing a net profit of $251,166.  Of this net profit, $132,507 is 

attributable to the share price increase immediately following Issuer B’s announcement on 

October 28, 2019. 

99. Based on their close interaction with Lewis, each tippee Defendant knew, 

consciously avoided knowing, or was reckless in not knowing that Lewis (1) was entrusted with 

material nonpublic information and (2) had a duty of trust and confidence.  All three trusted 

Lewis’ tipped inside information and invested a significant share of their personal wealth, 

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28 

precisely because they believed Lewis was ahead of the market and had provided them with 

material nonpublic information. 

IV. Jean J. O’Connor Received Ill-Gotten Gains From Defendants’ Illegal Conduct
to Which She Has No Legitimate Claim

100. Jean J. O’Connor held the Broker 3 account in her own name and held the Broker

4 account jointly with Patrick O’Connor.  Accordingly, she received approximately $141,871 of 

ill-gotten profits, which are directly attributable to Patrick O’Connor’s unlawful conduct 

described herein, and she has no legitimate claim to those funds. 

FIRST CLAIM FOR RELIEF 
Violations of Section 10(b) of the Exchange Act 
and Rule 10b-5 Thereunder (All Defendants) 

101. The Commission realleges and incorporates by reference each and every

allegation contained in paragraphs 1 through 100. 

102. By engaging in the conduct described above, Defendants, directly or indirectly,

singly or in concert, in connection with the purchase or sale of securities and by the use of the 

means or instrumentalities of interstate commerce, or the mails, or the facilities of a national 

securities exchange, knowingly and recklessly have (i) employed one or more devices, schemes, 

or artifices to defraud; (ii) made one or more untrue statements of a material fact or omitted to 

state one or more material facts, necessary in order to make the statements made, in light of the 

circumstances under which they were made, not misleading; or (iii) engaged in one or more acts, 

transactions, practices, or courses of business which operated or would operate as a fraud or 

deceit upon other persons. 

103. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert,

have violated and, unless enjoined, will again violate Exchange Act Section 10(b) [15 U.S.C. § 

78j(b)], and Rules 10b-5(a), (b), and (c) thereunder [17 C.F.R. § 240.10b-5(a), (b) and (c)]. 

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29 

SECOND CLAIM FOR RELIEF 
Other Equitable Relief, Including Unjust Enrichment and Constructive Trust 

(As To Relief Defendant Jean J. O’Connor) 

104. The Commission realleges and incorporates by reference each and every

allegation contained in paragraphs 1 through 100. 

105. Pursuant to Exchange Act Sections 21(d)(3), (5), (7) [15 U.S.C. §§ 78u(d)(3), (5),

(7)], the Commission is authorized to seek and any Federal court may order disgorgement. 

106. Relief defendant Jean J. O’Connor has received and possesses ill-gotten funds

derived from unlawful acts or practices of her husband Patrick J. O’Connor dictating that, in 

equity and good conscience, she should not be allowed to retain such funds. 

107. Jean J. O’Connor has no legitimate claim to this property.

108. As a result, Jean J. O’Connor is liable for unjust enrichment and should be

required to return her ill-gotten gains, in an amount to be determined by the Court. 

PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court enter a Final 

Judgment: 

I. 

Permanently restraining and enjoining Defendants and their agents, servants, employees 

and attorneys and all persons in active concert or participation with Defendants from violating, 

directly or indirectly, Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 

thereunder [17 C.F.R. § 240.10b-5]; 

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30 

II. 

Ordering Defendants and Relief Defendant to disgorge all ill-gotten gains received 

directly or indirectly, with pre-judgment interest thereon, as a result of the alleged violations 

pursuant to Exchange Act Sections 21(d)(3), (5), (7) [15 U.S.C. §§ 78u(d)(3), (5), (7)]; 

III. 

Ordering Defendants to pay civil monetary penalties under Exchange Act Section 21A 

[15 U.S.C. § 78u-1]; and 

IV. 

Granting any other and further relief this Court may deem just and proper. 

JURY DEMAND 

Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff demands trial by 

jury in this action of all issues so triable. 

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Date:  July 26, 2023 Respectfully submitted, 

/s/ James P. Connor 
James P. Connor* 
Carina A. Cuellar* 
U.S. SECURITIES AND EXCHANGE COMMISSION 
Division of Enforcement 
100 F Street, N.E. 
Washington, DC 20549 
Phone: (202) 551-8394 (Connor) 
Phone: (202) 551-6414 (Cuellar) 
Email: [email protected] (Connor) 
Email: [email protected] (Cuellar) 

* Pending admission pro hac vice

Of Counsel 
Timothy A. Work 
Kevin Guerrero 
Kristen Warden 
U.S. SECURITIES AND EXCHANGE COMMISSION 
Division of Enforcement 
100 F Street, N.E. 
Washington, DC 20549 

Case 1:23-cv-06438   Document 1   Filed 07/26/23   Page 31 of 31


	DEFENDANTS
	FACTS
	I. Lewis was Entrusted with Material Nonpublic Information and Knew That He Had a Duty to Maintain its Confidentiality
	II. Lewis Illegally Tipped Material Nonpublic Information about Issuer A to Carter, Which Carter then Illegally Traded Upon
	III. Lewis Illegally Tipped Material Nonpublic Information About Issuer B to Carter, O’Connor, and Waugh, Which They Each Then Illegally Traded Upon

	FIRST CLAIM FOR RELIEF