So! As previously mentioned, federal authorities are wrapping up a little project they’ve been working on for the past three years involving alleged insider trading, hedge funds, that sort of thing. The government claims the probes could “eclipse the impact on the financial industry of any previous such investigation” and that charges may come before the end of this year and perhaps as early as this week. Naturally it’s unclear as to exactly who the Feds are hoping to name as participating in the passing or receiving of material, non-public information but some educated guesses can be made, based on the accosting of one analyst, Jonathan Kinnucan.

Kinnucan, the founder of boutique firm Broadband Research LLC, was “sipping wine on his front porch in Portland, Oregon” when two men in suits popped out of a gray sedan and quite aggressively accused him of sharing inside information with his clients (hedge and mutual funds, mostly). They threatened to arrest him but then, changing to a friendly tone, suggested that things could be made better for Kinnucan if he did them a favor. “We think you can help us,'” he recalls. “There is this guy in particular we are after,” he remembers them saying. “We want you to have a conversation with him and record it.”

That guy, according to the Journal, is someone at SAC Capital, and while it’s not certain the proposed recorded phone call would be between Kinnucan and the King of the Jungle, it is quite certain the Feds want the most majestic hedge fund in all of Stamford, CT and possibly Fairfield county.

But back to Jonathan. Several years back he was hit by a bus while on a run in Florida. His lungs were collapsed, his liver lacerated and there was serious internal bleeding and while speaking with the gentlemen from the FBI, he says “I just thought about being under that bus and knowing you have to keep fighting.” Despite inviting them into his kitchen, the hits kept coming. “It felt like a street mugging,” he says. “They were hammering me from either side.”

Kinnucan was told if he didn’t cooperate “there would be trouble,” and given the terrifying situation some might have buckled under the pressure. Did JK? Did he break down and cry, telling the Feds “Okay, fine, I’ll do it, I’ll do anything, just don’t hurt me?” No, he did not.

Instead, he 1) informed the agents that what he does “has nothing to do with ‘inside information’ and everything to do with a lot of hard work and insight” and that “if he’s trafficking in inside information…then so is the rest of Wall Street.”

2) Told them to piss off and thanks but no thanks to their offer to wiretap (at least we think; it’s actually unclear if JK has been wiretapped, but we’re giving him the benefit of the doubt).

3) Sent out a whimsical email to clients, including SAC and Citadel, tipping them off to the investigation, describing the visit and his heroic efforts to shield them from these beasts.

“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,” the email said. “(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.”

When the time comes, hopefully all of you will take a page from Kinnucan’s playbook. You lie down in the street (and get hit by a car or bus) if you have to.

FBI Visits Shed Lights On Tactics In Insider Trading Probes

94 comments (hidden to protect delicate sensibilities)
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Comments (94)

  1. Posted by Guest | November 22, 2010 at 2:24 PM


    Thanks for your note from 12:30 this morning. We appreciate your efforts. Please accept this message as a formal termination of our subscription to your service. If you could just send a check with the remaining balance to us, that would be super.

    Kind regards,

    SAC Research Department

  2. Posted by Guest | November 22, 2010 at 2:30 PM

    So. What’s the penalty for obstruction of justice these days?

  3. Posted by Guest | November 22, 2010 at 2:34 PM

    If it was all about hard work and insight, he should have let the wiretap proceed to prove the Feds wrong. The way he did it, as seen by the termination letter above, you have all the rats jumping the sinking ship with the knowledge that the Feds are listening. Kaboom goes the research biz.

    All is not lost, though. I do like his analogies and art of storytelling. I think he has a writing future for HBO awaiting him.

  4. Posted by Quattrone | November 22, 2010 at 2:35 PM

    Fame and Fortune.

  5. Posted by tranche monkey | November 22, 2010 at 2:37 PM

    On second thought, just forget about the check and lose our number.

    SAC Director of Research

  6. Posted by Guest | November 22, 2010 at 2:40 PM

    “declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.” is pure poetry

  7. Posted by Guest | November 22, 2010 at 2:42 PM

    Feeling a bit jumpy today for many reasons, but the main one is I’ve clicked on flashing siren newsbreaks on DB and traded on that info.

    –guy who’s going to run silent and deep for a while till this blows over.

  8. Posted by Kosta | November 22, 2010 at 2:48 PM

    Is Level Global next?????

  9. Posted by Guest | November 22, 2010 at 2:52 PM

    Where the hell was the FBI when Mack was busy getting Aguirre Fired??? Asleep at the switch as usual….they’ll bust a few peons and let the big guys walk, as usual!

  10. Posted by Guest | November 22, 2010 at 2:54 PM

    The multiple question marks really add gravitas to your comment.

  11. Posted by P_Jiang | November 22, 2010 at 2:55 PM

    I did something similar and by similar I mean I shoved the evidence up my ass.

  12. Posted by DealDefender | November 22, 2010 at 3:15 PM

    Guy’s clearly an idiot. If the cops show up you 1) ask for credentials; 2) ask if youre under arrest, or if they have a search warrant; 3) shut the fuck up and say nothing. Last thing you do is send out a pissy email. What a cock sucker. I hope they pinch him -and tase him

  13. Posted by Non-Entity Hedge Fund Manager | November 22, 2010 at 3:16 PM

    That wearing a wire would cause his clients to be ‘ensnared in the FBI’s devious web’ suggests that his clients are doing ensnareable things. Other than that, I have no concerns.

    – Guy who generates alpha using a Dell laptop and the EDGAR database

  14. Posted by Guest | November 22, 2010 at 3:19 PM

    as noted in the article, his contract with SAC stated he must notify them in these cases.

  15. Posted by Shia Feva | November 22, 2010 at 3:27 PM

    […..]ensare you in their devious web.

    ….But, There’s Always Money in the Banana Stand. [wink]

  16. Posted by NKI_hound | November 22, 2010 at 3:28 PM

    Writing poetry for a living because the feds have killed your biz is the NKI.

  17. Posted by Anonymous | November 22, 2010 at 4:01 PM

    It was easy for us to disappear. My house was in my mother-in-law’s name. My cars were registered to my wife. My Social Security cards and driver’s licenses were phonies.

    I never voted or paid taxes. My birth certificate and arrest sheet were all that showed I was alive.

  18. Posted by Pfluger the Barbarian | November 22, 2010 at 4:06 PM

    I see your every move. I know everything you say. I read all of your e-mails. I even know who your wife is stupfing while you are at work. I am watching you.

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  19. Posted by DealDefender | November 22, 2010 at 4:19 PM

    You have no idea what you’re talking about. And such a clause would NEVER hold in court if it actually says what you purport.

  20. Posted by Henry Blodget | November 22, 2010 at 5:10 PM

    Tell me about it

  21. Posted by Anonymous | November 22, 2010 at 5:41 PM

    Pinch him for what? Doesn’t sound like he’s charged with anything.

  22. Posted by wsjevons | November 22, 2010 at 6:09 PM

    Notouching! Notouching!

  23. Posted by MooseFister | November 22, 2010 at 6:10 PM

    We need more stories with the “beavers” tag.

    – Kurt Vonnegut

  24. Posted by Guest | November 22, 2010 at 10:10 PM

    Go ahead, you all laugh, but look at what they did to Danielle Chiesi.

    “On Monday, Ms. Chiesi testified she was awoken by agents banging on her door in the early morning hours of Oct. 16, 2009. Taking repeated swigs from a water bottle while testifying, Ms. Chiesi said the agents were polite, but were urging her cooperate in the investigation.

    She also testified that they wanted her to call someone on the West Coast, in a telephone call that would be monitored by agents.

    Ms. Chiesi was eventually placed under arrest and taken to the New York FBI offices because her cooperation wasn’t to the level agents were seeking, the agents testified.

    Ms. Chiesi testified that she could remember almost everything that was said that morning in her apartment, including one agent getting along with her cat, and the last thing she would want do is “perjure” herself on the stand.”

  25. Posted by Jimmy | November 22, 2010 at 10:24 PM

    Rumor has it the new strategy will involve “Raise Your Rate” CDs.

  26. Posted by Jimmy | November 22, 2010 at 10:26 PM

    And, wrong thread.

  27. Posted by Berniemadoff | November 23, 2010 at 1:29 AM

    JK’s research work was so good that he had already compiled info on the FBI interrogators. More about them in his next research report. JK will show that most of these Federal employees have failed to do their job. In fact the SEC and FINRA had complete evidence on Bernie Madoff and they looked the other way. Now the FBI should go after their fellow federal employees. Thanks to all you guys that voted for Obama and the dems.

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