U.S. in Insider Trading Probe..FBI raids funds

http://online.wsj.com/article/SB10001424052748704170404575624831742191288.html?mod=WSJ_hp_LEFTTopStories

Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to people familiar with the matter.

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.

One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide “expert network” services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.

http://www.nytimes.com/2010/11/21/business/21trade.html?src=twrhp

News of the investigations’ advanced stages was reported Friday night on the Wall Street Journal Web site. The article said that federal authorities could bring insider trading charges that “could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation.”

The government official familiar with the matter confirmed the outlines of The Journal’s article, but would not say whether arrests were imminent or whether specific companies were targets.

Goldman Sachs is among the firms under scrutiny, according to a person briefed on the investigation who was not authorized to discuss the matter publicly. The person said the inquiry involved several low-level Goldman employees, not executives.

A Goldman spokesman, Michael DuVally, declined to comment.

Both the Justice Department and the Securities and Exchange Commission have taken an increasingly aggressive — and public — stance in pursuing insider trading on Wall Street. Among the government officials taking the hardest line is Preet Bharara, the United States attorney in Manhattan.

“Illegal insider trading is rampant and may even be on the rise,” said Mr. Bharara in a speech last month. “Disturbingly, many of the people who are going to such lengths to obtain inside information for a trading advantage are already among the most advantaged, privileged and wealthy insiders in modern finance. But for them, material nonpublic information is akin to a performance-enhancing drug that provides the illegal ‘edge’ to outpace their rivals and make even more money.”

Any new charges brought by the government would come on top of a widespread insider-trading case — billed by Mr. Bharara’s office as “the largest hedge fund insider trading case in history” — that has ensnared a number of money managers and company executives, including the Galleon co-founder Raj Rajaratnam. Last week two more Wall Street traders were revealed to have pleaded guilty to securities-fraud charges, the 13th and 14th people to have pleaded guilty in the criminal case.

In all, 23 people have been charged criminally in the investigation.

Earlier this month a judge sentenced Ali Hariri, a former executive at Atheros Communications, a technology company, to 18 months in prison for his participation in the Galleon case. Prosecutors alleged that Mr. Hariri provided a hedge fund manager with inside information relating to his company.

The “sentencing provides another reminder of how pervasive insider trading has become and the lengths to which corrupt insiders will go to misuse confidential information for their own personal gain,” Mr. Bharara said in a statement. “It should also remind those who might contemplate similar crimes that we will ultimately find you, prosecute you and convict you.”

Mr. Bharara’s sharp rhetoric is evocative of the insider-trading scandal during the 1980s when Rudolph W. Giuliani, then the United States attorney in Manhattan, prosecuted Wall Street executives using laws that had rarely been enforced. (Exactly 20 years ago Sunday, a federal judge sentenced the financier Michael Milken to 10 years in prison for securities violations relating to the insider-trading scandal.)

In pursuing insider-trading cases, the United States attorney’s office has adopted increasingly aggressive techniques. In the case against Mr. Rajaratnam, federal authorities took the unusual step of using wiretaps to record his and other stock traders’ conversations. Federal prosecutors have traditionally used wiretaps for organized crime and drug trafficking.

A federal judge in Manhattan is weighing whether prosecutors can use thousands of wiretapped conversations between Mr. Rajaratnam and his purported accomplices at his trial, which is set for next year.

Lawyers for Mr. Rajaratnam argue that the government’s use of wiretaps was improper.

Any new cases brought by Mr. Bharara would add to a robust lineup of insider-trading cases.

In October, a federal jury found a former hedge fund manager guilty of an insider-trading scheme that prosecutors alleged earned more than $7 million in illicit gains. Federal prosecutors had charged the trader, Joseph Contorinis of the Jefferies Paragon Fund, of trading on tips about coming mergers from an investment banker at UBS. The banker, who had already pleaded guilty, was the government’s key witness at trial.

http://abcnews.go.com/Business/wireStory?id=12213462

The FBI raided three hedge funds in connection with a widening probe into insider trading, the Wall Street Journal said on Monday.

Diamondback Capital Management LLC and Level Global Investors LP, two Connecticut funds run by former managers of Steven Cohen’s SAC Capital Advisors, were among those raided, according to the report.

Also raided was Boston-based Loch Capital Management, according to the report. Loch has had close ties with a witness who pleaded guilty in a separate insider trading probe centered on the Galleon Group hedge fund.

The raids come as federal prosecutors prepare to unveil a series of new insider trading cases against hedge fund traders, consultants and Wall Street bankers, several lawyers familiar with the investigation said.

This is on top of what prosecutors have described as the largest U.S. hedge fund insider trading case ever. That case is centered on Raj Rajaratnam’s hedge fund Galleon Group, and has led to criminal or civil charges against at least 23 people since being announced just over one year ago.

“The Justice Department promised a more muscular approach to white-collar crime, and is delivering,” said Eugene O’Donnell, a professor at the City University of New York’s John Jay College of Criminal Justice.

FBI spokesman Richard Kolko on Monday said the agency had executed search warrants in connection with an ongoing investigation. He declined to discuss the nature of the probe or the targets. A different FBI spokesman confirmed a raid took place at a downtown Boston building housing Loch offices.

Started in 2005, Diamondback oversees roughly $5 billion of assets and is based in Stamford, Connecticut. Based in nearby Greenwich, Level Global has roughly $4 billion of assets and is run by SAC alumnus David Ganek. Loch once had more than $2 billion of assets.

None immediately returned requests for comment.

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“and the negative news that will send the market lower”..

all about the timing..wow..insider trading..so shocked eh?..we showed how congress can legally do insider trading..why cant the outside world?..its rigged anyway..so hypocritical these regulators..

401

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~ by seeker401 on November 23, 2010.