Later this week, Anthony Chiasson, a Level Global co-founder, and Todd Newman, a former Diamondback portfolio manager, will go to trial in Federal Court for allegedly making $67 million in ill-gotten gains, based on inside information they obtained about Nvidia Corp and Dell Inc. According to U.S. Attorney Preet Bharara, Chiasson and Newman, who’ve both pleaded not guilty, were able to rack up all their profits by teaming up with a bunch of friends and forming an insider trading club, which is a lot like a book club or fight club in that they took roll, traded canapé duties, and drank Pinot Grigio, but different in that instead of discussing The Art Of Fielding or punching each other in the face, they spent every Monday night from 7 to 9 sharing material non-public information with each other.

“This case describes a tight-knit circle of greed on the part of professionals willing to traffic in confidential information,” Bharara said when the charges were announced in January. “It was a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered inside information.”

In the beginning, when the club was first formed, there was a spirit of camaraderie, as the members happily traded tips for everyone’s mutual benefit. Unfortunately, things started to break down when some people agreed to cooperate with the government by recording their friends admitting wrongdoing in exchange for leniency. Former Diamondback analyst Jesse Tortora, for instance, attempted to incriminate fellow club member Danny Kuo on a call the FBI directed him to make on December 1, 2010, a conversation that Chiasson and Newman’s lawyers are now trying to use as evidence that Tortora, who will be testifying against them lacks credibility, based on the fact that when asked by Kuo if his phone was being tapped, Tortora didn’t say “Yup! Helping the Feds build a case against you, actually.” Instead he went with this:

“What’s happening, man?” Tortora asked during the call, according to a transcript prosecutors submitted to the court.

“Dude, is your phone tapped?” Kuo replied.

“Wait, is the phone tapped?” Tortora asked, adding, “Why do you ask that?”

“Wait, is the phone tapped”? “Why do you ask that”? Come on, Torts, act like you’ve done this before. Still, despite losing major points for repeating the question– you never repeat the question!– and the extremely unconvincing “Oh, why do you ask” attempt to act natural and not like he was working for the government, Tortora ultimately recovered and left Kuo suspecting nothing, as evidenced by his parting tip, re: how to keep the G-man off your trail.

After Kuo and Tortora discussed defense strategy to explain their trades were made after legitimate research, Kuo concluded the call with a final warning to Tortora about making future calls from a personal telephone, according to the transcript. “I would seriously invest in some quarters, and start calling from 7-Elevens,” Kuo said.

Hedge Fund Founder Faces Jury as FBI Raids Yield Trial [Bloomberg]

29 comments (hidden for your protection)
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Comments (29)

  1. Posted by Boss Hogg | November 7, 2012 at 1:48 PM

    I don't trust people named Jesse

  2. Posted by Guest | November 7, 2012 at 1:52 PM

    Kuo: Dude is that herpes?

    Tortora: No man its just a cold sore!

    Kuo: Ohhhh ok.

  3. Posted by Guest | November 7, 2012 at 1:54 PM

    Jesus …1:39?

    I almost read that logisitcs email i was so bored.

  4. Posted by Guest | November 7, 2012 at 1:54 PM

    Do you want to trade stocks profitably using insider information? The Taushiro Institute of Brooklyn is offering introductory courses for only $599/person. Taushiro, a language of native Peru, is spoken in the region of the Tigre River, Aucayacu River, which is a tributary of the Ahuaruna River. It is known as a language isolate, which means it has no demonstrable relationship with any other language. Those who spoke the language usually only counted up to ten, using their fingers. For instance, to say “one” in Taushiro, you’d say washikanto. To say a number above 10, you’d say “ashintu” and point to a toe on your foot. In 2008, a study conducted on the Taushiro language concluded that only one person speaks the language fluently. The language has since been listed as nearly extinct.

  5. Posted by Guest | November 7, 2012 at 2:02 PM

    Investing in quarters, you say? Sounds interesting. Send me a PPM.

    - MD, UBS Asset Management

  6. Posted by You think thats bad | November 7, 2012 at 2:03 PM

    Is this post laced with a subliminal caption contest!? Bess, stop using use as lab rats for your sick experiments! Ahhhhhhhh.

  7. Posted by C-Gas | November 7, 2012 at 2:05 PM

    I can count to 20, but I have to take my shoes off. Actually, I can count to 21, but not in public.

  8. Posted by guest | November 7, 2012 at 2:08 PM

    I broke out in hives.

  9. Posted by Cock-eyed | November 7, 2012 at 2:10 PM

    Who brings fondue to a gangbang?

  10. Posted by Chazzy Chaz | November 7, 2012 at 2:12 PM

    I can count to 20, but I have to take my shoes off. Actually I can count to 21, but last time I did so in public I was arrested.

  11. Posted by Mighty Taco | November 7, 2012 at 2:14 PM

    Make it five easy payments of $119.8 and I'm there!

  12. Posted by Athena | November 7, 2012 at 2:23 PM

    Torts is totes on the take.

  13. Posted by investorcluzo | November 7, 2012 at 2:26 PM

    If you're even thinking about asking the question "is your phone tapped?" You should immediately hang up and make no effort to return calls to the person in question.
    -Boseky, Ivan F., 1988, "Insider Trading Handbook." California. Lompoc Federal Prison Press.

  14. Posted by Guest | November 7, 2012 at 2:32 PM

    Yeah, well, I tapped your wife last night. I tapped all your wives.

    -Barry

  15. Posted by Guesteban | November 7, 2012 at 2:43 PM

    I learned the hard way.

    - Jesse's Girl

  16. Posted by Sean | November 7, 2012 at 2:45 PM

    The Sisterhood Of The Traveling Taps?

  17. Posted by Guest | November 7, 2012 at 2:52 PM

    Kyle Bass is short quarters, but long nickels.

  18. Posted by Herb Schmertz | November 7, 2012 at 2:53 PM

    Divine Secrets of the YHOO Brotherhood

  19. Posted by agreatdaytothink | November 7, 2012 at 2:55 PM

    I did. Once.

    - Sandra B.

  20. Posted by Sandy | November 7, 2012 at 2:57 PM

    Wedding Crashers

  21. Posted by agreatdaytothink | November 7, 2012 at 2:58 PM

    What if I know that Forever 21 is going to buy Century 21? Not too usefual then, is it? Pass.

  22. Posted by Mr Nice Guy | November 7, 2012 at 2:58 PM

    Jesse Owens……

  23. Posted by Larry Fondue | November 7, 2012 at 3:02 PM

    Me.

  24. Posted by Sausage of Doom | November 7, 2012 at 3:14 PM

    I prefer to call from the Taco Bell.

    – You know who

  25. Posted by Wire | November 7, 2012 at 3:57 PM

    First CityWide Change Bank has already captured all the alpha here.

  26. Posted by Tell me mo | November 7, 2012 at 4:03 PM

    Affordable fashion meets personal touch realtor?!!?@?

  27. Posted by Quant me maybe | November 7, 2012 at 4:21 PM

    “This case describes a tight-knit circle of greed on the part of professionals willing to traffic in confidential information,” Bharara said when the charges were announced in January. “It was a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered inside information.”

    Sounds like Congress.

  28. Posted by GUEST | November 7, 2012 at 4:59 PM

    How does that work? How do they make money?

  29. Posted by GUEST | November 7, 2012 at 5:00 PM

    Haha. Right, keep telling yourself that.

    -Larry Fondue's Pimp