(Reuters) — U.S. prosecutors brought insider trading charges against the founder and former chief executive of Auspex Pharmaceuticals Inc., accusing him of providing illegal tips to friends and family as Teva Pharmaceutical Industries Ltd. prepared to buy his company in a $3.5 billion transaction.

Sepehr Sarshar was accused on Tuesday of misappropriating material nonpublic information from San Diego-based Auspex in early 2015 related to Teva’s expected tender offer, and passing tips to his girlfriend, two other friends and a close relative.

The office of acting U.S. Attorney Audrey Strauss in Manhattan said the resulting trading in Nasdaq-listed Auspex generated more than $700,000 of illegal profit.

It also said Mr. Sarshar misled the Financial Industry Regulatory Authority, the industry's own watchdog, in its probe of suspect trading in Auspex, by concealing his ties to recipients of the tips.

Mr. Sarshar, 53, of Encinitas, California, was charged with securities fraud, wire fraud and fraud in connection with a tender offer.

The charges carry maximum prison terms of 25, 20 and 20 years, respectively. The U.S. Securities and Exchange Commission filed a related civil case against Mr. Sarshar.

Lawyers for Mr. Sarshar did not immediately respond to requests for comment. Teva was not charged or accused of wrongdoing.

“Time and time again we see where those privy to a company’s inside information pass it on to family and friends,” FBI Assistant Director William Sweeney said in a statement. “Upsetting the market balance in this way puts all investors at a disadvantage.”

Teva agreed on March 30, 2015, to pay $101 per share in cash for Auspex, a 42% premium over its most recent closing share price. The Israeli drugmaker completed the acquisition five weeks later.

Auspex’s main product aimed to treat chorea, a disorder characterized by abnormal involuntary movement and sometimes associated with Huntington’s disease.

The criminal case is U.S. v. Sarshar, U.S. District Court, Southern District of New York.