RSF man dealt $337 million fraud, DOJ says

The United States District Court for the Northern District of California this week unsealed an indictment returned by a federal grand jury in San Francisco charging Rancho Santa Fe resident Racho Jordanov with conspiracy to commit trade secret theft and wire fraud, international money laundering, and related charges including obstruction of justice.

Jordanov was the co-founder and former Chief Executive Office of JHL Biotech. He was charged along with Rose Lin, another of the company’s co-founders and former Chief Operating Officer

Acting United States Attorney Stephanie M. Hinds, Internal Revenue Service ̶ Criminal Investigations, Special Agent in Charge Michael Daniels, and Federal Bureau of Investigation, Special Agent in Charge Craig D. Fair announced the unsealed indictment.

According to the indictment, in 2012, Raco Ivanov Jordanov, also known as “Racho” Jordanov, 73, of Rancho Santa Fe and Rose Lin, also known as Rose Sweihorn Tong, 72, of South San Francisco, Calif., were alleged to have co-founded JHL Biotech, Inc., a biopharmaceutical start-up headquartered in Zhubei, Taiwan, with offices in Wuhan, China, and Rancho Santa Fe, Calif.  JHL Biotech is now known as Eden Biologics, Inc. and Chime Biologics (Wuhan), Ltd.

The indictment alleges that Jordanov and Lin, beginning as early as 2008, engaged in a fraudulent scheme to steal thousands of confidential and proprietary documents from Genentech that eventually helped JHL Biotech secretly accelerate its development and production of “biosimilars,” or generic versions of Genentech biologics.  Some of the confidential documents stolen from Genentech and obtained by Jordanov and Lin allegedly contained trade secrets.

The indictment alleges that, starting in 2009, Lin recruited an experienced and accomplished scientist then working at Genentech and her husband to work as a team to purloin confidential information from within Genentech.  Beginning in 2013, Lin and Jordanov allegedly used confidential information from the husband and wife team and other sources to help JHL Biotech cut corners, reduce costs, solve problems, save time, and otherwise accelerate product development timelines, secretly using Genentech’s high-quality, confidential, intellectual property.

In 2014, as alleged in the indictment, Jordanov and Lin supervised and managed a so-called “conversion” project whereby JHL employees converted confidential Genentech standard operating procedures or “SOPs” into JHL Biotech SOPs.  For example, JHL employees engaged in the wholesale cutting and pasting of logos from the confidential documents by simply cutting out Genentech logos and pasting in JHL Biotech logos to make the Genentech SOPs appear, falsely, to be JHL Biotech SOPs.

JHL Biotech employees allegedly drafted approximately ninety (90) different SOPs using Genentech documents, many of which were confidential and proprietary.  JHL Biotech employees maintained a spreadsheet in which they identified Genentech SOPs that JHL Biotech possessed and tracked the progress to convert these into JHL Biotech SOPs.  The widespread use of the stolen Genentech SOPs allegedly saved JHL Biotech thousands of dollars.

To profit from the trove of stolen confidential, proprietary, and trade secret information, Jordanov and Lin, according to the indictment, then carried out a scheme to defraud JHL Biotech’s potential investors and strategic partners.  To induce investment, and obtain money for JHL Biotech and themselves, Jordanov and Lin allegedly defrauded investors by concealing the extent to which JHL Biotech used stolen intellectual property to start, accelerate, and conduct its business.

The indictment alleges that, in late 2016, JHL Biotech entered a strategic partnership with Sanofi S.A., a French multinational pharmaceutical company headquartered in Paris, France, to manufacture and distribute biosimilars in China.  As part of the agreement, in December 2016, Sanofi allegedly paid $101 million to JHL Biotech, using foreign and interstate wires to carry out the corporate transaction.

This cash payment allegedly was part of a strategic relationship worth potentially $337 million to JHL Biotech.  To induce Sanofi’s payment of $101 million in cash, Jordanov allegedly signed representations and warranties that falsely stated that JHL Biotech’s knowledge, research, development, use, and manufacture, of certain biosimilars had been conducted without infringing or misappropriating intellectual property from any third party.

Jordanov also allegedly made false and misleading statements about consultants used by JHL Biotech and otherwise concealed from Sanofi the secret work of the Genentech insider for JHL Biotech.  In 2019, following the public disclosure of some of the alleged criminal conduct, the value of JHL Biotech, once as high as approximately $916 million, allegedly crashed.

“According to the indictment, JHL Biotech was a nearly $1 billion Taiwanese unicorn built on a foundation of lies,” Acting United States Attorney Hinds stated.  “The indictment alleges defendants used confidential documents and trade secrets stolen from Genentech to build a competitor and enrich themselves.

This kind of complex intellectual property theft and fraud not only harms victims, it threatens the intellectual property of an industry with strategic importance to the United States.  This United States Attorney’s Office will always aggressively prosecute corporate espionage to protect innovation, a crown jewel of our District.”

“The indictment of these two executives alleges the misuse of their positions of trust, within their corporations, to commit financial fraud,” said IRS Criminal Investigation, Acting Special Agent in Charge Michael Daniels.  “No matter your career or position we will investigative financial crime wherever it is conducted.  We will continue to work with our law enforcement partners to bring this investigation to a thorough and complete conclusion.”

“As alleged in the indictment, the defendants in this case increased their wealth by cutting corners and stealing valuable information from a competitor.” said FBI San Francisco Special Agent in Charge Craig D. Fair. “Rather than excelling at their own scientific research, the defendants instead attempted to excel at theft and fraud.”