During the course of its review process with the Food and Drug Administration (FDA) Waksal became involved in an insider trading scandal revolving around improper communications with personal friends and family members.
When it won the rights to develop Erbitux, a cancer antibody, the drug's clinical success caused ImClone's stock to reach a high of $70 a share.
In September 2001, Bristol-Myers Squibb was intrigued enough by Erbitux to sign a $2 billion deal with the company in return for the marketing rights to the drug.
[6] In December 2001, however, the FDA issued a Refuse to File[7] decision effectively turning down ImClone's application due to concerns about the structure of the clinical trials.
Until then, under federal securities law, Waksal was barred from selling his ImClone stock or telling anyone about the pending rejection.
However, public release of the Erbitux rejection would expose Waksal to a number of financial problems beyond the near-certainty of ImClone's stock sliding.
When Waksal's broker at Merrill Lynch, Peter Bacanovic, became aware of the pending rejection, he alerted their mutual friend, Martha Stewart, that ImClone was about to lose a good deal of its value.
The art included works by Mark Rothko, Richard Serra, Roy Lichtenstein, and Willem de Kooning, purchased between June 2000 and October 2001.
[9] On June 10, 2003, Waksal was sentenced to seven years and three months in prison and ordered to pay more than $4 million in fines and back taxes, all the maximum punishments allowable under law.