Newspaper article The Christian Science Monitor

Insider Trading Crackdown: US Alleges Scam by Hedge Fund Managers

Newspaper article The Christian Science Monitor

Insider Trading Crackdown: US Alleges Scam by Hedge Fund Managers

Article excerpt

Insider trading: Three fund managers and an analyst are charged with an alleged insider trading scam that netted $30 million. The US crackdown on insider trading at Wall Street hedge funds was first revealed last fall.

Continuing a crackdown on insider trading on Wall Street, federal officials on Tuesday announced charges against three hedge fund managers and a research analyst in a scam that investigators say netted $30 million.

Samir Barai and Donald Longueuil, both former hedge fund managers, were charged on Tuesday and made initial appearances in federal court in Manhattan. They face multiple charges of insider trading and obstruction of justice.

The two others, research analyst Jason Pflaum and portfolio manager Noah Freeman, had already pled guilty to a single count of conspiracy to commit securities fraud. Officials revealed that both men had been secretly cooperating with authorities in a deal for leniency.

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"The complaint unsealed today is a sad chronicle not only of criminal conduct but also its brazen cover-up," US Attorney Preet Bharara said in a statement. "The lengths to which two of these defendants went to cover up their tracks sounds like something from a bad movie."

So far, federal authorities have charged 12 individuals in a hedge fund crackdown first revealed last fall. Four have pled guilty.

"We are far from finished," Mr. Bharara said.

According to officials, the four hedge fund executives allegedly conspired from 2006 to 2010 to obtain insider information - such as earnings statements - before the data was made public. The group allegedly obtained the information directly from employees working at the publicly traded companies or indirectly via an "independent research consultant" who obtained the information from employees and shared it.

In one example, the group allegedly obtained the quarterly revenues, gross margins, and earnings per share for Marvell Technology Group. Acting on the information before its release to the public, members of the alleged conspiracy bought Marvell stock in anticipation that the information would lead to a stock price jump. …

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