insider-trading

Today’s Insider Trading Arrests Brought To You In Part By A Cooperating Witness Whose Name Starts With The Word “Spy”

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Remember, about a year ago, when hedge fund Level Global was rumored to have a government mole in its ranks? At the time, the firm’s representatives said such reports were total bull shit, and, investors were told, here’s how they knew that to be the case:

“As is the case each time there is a new development in the U.S. Attorney’s investigation, we have conducted an extensive internal factual correlation analysis, cross-referencing the facts in the complaints to our firm’s records. Our experienced outside legal counsel has also conducted its own analysis. Based on all of our work and analysis, we have concluded that these complaints do not appear to be referencing Level or Level personnel.”

Frankly, LG was getting a little tired of having to constantly run factual correlation analysis in order to prove the world wrong but c’est la vie. Anyway, despite usually having a 99.9% accuracy rate, the factual correlation calculator apparently missed one.

Last month, federal prosecutors in Manhattan said in a court filing in the case of a PGR employee that Level Global had made a $1.7 million profit by covering a short position it had in Taiwan Semiconductor Manufacturing Co. Ltd. in June 2009. That May and June, a Level Global technology analyst had about seven phone calls with Manosha Karunatilaka, a PGR expert who worked at TSMC and has pleaded guilty to supplying inside information to investment fund clients, prosecutors said. The Level Global technology analyst, Spyridon “Sam” Adondakis, was overseen by Mr. Chiasson and is cooperating with the government’s investigation, the Journal has previously reported, citing people familiar with the situation.

And now this is happening: Read more »

Maybe Rajat Gupta Just Wanted Raj Rajaratnam To Console Him Over Goldman’s 3Q2008 Loss, Not Go And Trade On It

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Rajat Gupta was arrested today for maybe telling Raj Rajaratnam some stuff that he wasn’t supposed to tell him, and thus putting in motion a complex chain of events that has ruined the lives of many a man, woman, and dog. You can have two broad categories of theory about why Rajat Gupta went around telling Raj Rajaratnam inside stuff about Goldman and P&G board meetings:*

1. He expected Raj to trade on that information and make money, and he was cool with that because (1) they were some sort of sinister South Asian cabal intent on bringing down the WASP financial system, (2) he was going to make money off of it, or (3) they were friends, and friends want to see their friends succeed in business/crime. Or

2. He did not expect Raj to trade on that information and just thought neat stuff was happening and wanted to share it with his friend. “Whee, Raj, we’re getting money from Buffett! Bet you’ve never done that.” Or, as his lawyer put it, “There were legitimate reasons for any communications between Mr. Gupta and Mr. Rajaratnam – not the least of which was Mr. Gupta’s attempt to obtain information regarding his $10 million investment in the GB Voyager fund managed by Mr. Rajaratnam.”

What matters is that #1 is probably a crime and #2 is probably not, because the crime of insider trading depends not only on what you did but on what was in your heart when you did it. If you did it for gain – even the vague gain of winning your friend’s gratitude – then it’s a crime. If not, not. :robably. It’s hard to get direct access to a man’s heart, particularly if he was trained by McKinsey. And Raj isn’t about to sell out friends to these choots in the US Attorney’s office.
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Raj Rajaratnam Was Done In By Multiple Moles

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Less than two weeks ago, Raj Rajaratnam was sentenced to 11 years in prison, after being convicted on 14 counts of securities fraud and conspiracy last May. Over the course of the trial, Raj had remained silent, choosing not to take the stand on his own behalf and offering no sound bites to reporters outside the courthouse, speaking only when it was absolutely necessary (to request “extra mayo“) and allowing his lawyer, John Dowd, to do the talking (asking a Wall Street Journal reporter how long one could reasonably expect him to continue “sucking on [U.S. Attorney for the Southern District of New York Preet] Bahara’s teat,” declaring the guilty verdict a “23-14 victory” for the defense, and telling CNBC to “get the fuck out of here“). Recently, however, the former hedge fund manager decided to open up, allowing a reporter into his home where he pulled the curtain back on how this whole thing went down, starting with the state in which the Feds found him that fateful morning.

It was 6 a.m. on Oct. 16, 2009, and Raj Rajaratnam, head of the Galleon Group hedge fund, was at home on* his exercise bike looking out over Manhattan’s Turtle Bay.

Raj could have mentioned that he next moved on to shirtless arm curls and was on 1,003 at the exact moment Bhara and his crew busted into the apartment but felt like bragging. For posterity’s sake, though, it should be noted that he did over 1,000.

Moving on.

What he was actually doing at tipster Rajiv Goel’s home all those times, contrary to what the press and the government would have you believe?

…the prosecution noted that Rajaratnam would visit Goel’s house in Silicon Valley, presumably to talk about Intel. But the real explanation is more human. “His wife makes really good chaat [a savory snack]!”

Okay, that’s believable, but what about the material non-public information he got elsewhere? Read more »

Raj Rajaratnam Gets 11 Years, Needs A Kidney

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The defense had asked for 6.5 to 8 years on account of 1) the fact that, they say, Raj only made $7.4 million off his trades and 2) the “unique constellation of ailments ravaging his body” that would result in him dying behind bars if given a sentence “anywhere near” the prosecution’s request for 19.5 to 24 years. Read more »

Reader Poll: How Long Will Raj Rajaratnam Suffer The Indignity Of Unflattering Jumpsuits?

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At some point tomorrow, Raj Rajaratnam will be sentenced for the 14 counts of securities fraud and conspiracy he was found guilty on in May. The prosecution, which claims the Galleon founder netted “at least” $50 million in ill-gotten gains, has requested he go away for anywhere between 19 years and seven months to 24 1/2 years, while the defense, which argues Raj scored a mere $7.4 million, would prefer 6 1/2 to 8 years. To that end, the Rajaratnam team led by attorney John “How long are you going to suck [U.S. Attorney for the Southern District of New York] Preet’s teat” Dowd has 1) asked friends of Raj to send character letters to Judge Howell highlighting what a great guy he is and 2) made the bold statement that Rajaratnam is suffering from a “unique constellation of ailments ravaging his body” and that he will most certainly “perish if given a lengthy prison term.” To date, individuals vaguely and otherwise connected to the Galleon case have been sentenced to 2.5 years (Danielle Chiesi), 3 years (Emanuel Goffer), 4 years (lobster fiend) 10 years (Zvi Goffer). So! Read more »

We May Soon Find Out What The “Unique Constellation Of Ailments Ravaging” Raj Rajaratnam’s Body Are, Specifically

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On October 13, Judge Richard Holwell will pass down a sentence for convicted insider trader, Raj Rajaratnam. If the prosecution has its way, the Galleon Group founder will go away for twenty-four years. Obviously, the defense would prefer a little less time and in August, following Raj’s brother’s unsuccessful appeal for people to send character letters to the judge asking for lenience, turned to Plan B: breaking the news that Raj is suffering from a disease the likes of which you can’t even imagine, noting in a court filing that he will die from “unique constellation of ailments ravaging his body” if given anything even approaching twenty years. This, clearly, was well-played. Read more »

Father-Son Insider Traders Provide Window Into ETF Markets, TD Ameritrade Phone Surveillance

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The SEC’s administrative action against Spencer Mindlin & Dad yesterday had me scratching my head, and not just because TD Ameritrade managed to record a conversation between Mindlins père and fils when they had Ameritrade on hold. That should not be possible.

From what I’ve seen of this case it really doesn’t look like insider trading to me, though I’m always less willing to see insider trading than, say, the SEC is. But more interesting to me is what the case shows about the ETF market.
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Galleon Sentences Now Getting Serious

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Betracksuited Galleon trader Zvi Goffer got some bad news today:

Zvi Goffer, the ex-Galleon Group LLC trader, was sentenced to 10 years in prison for his role in a scheme to trade on inside information provided by lawyers. …

“I view this as a tragic day,” said U.S. District Judge Richard Sullivan, who handed down the sentence in a hearing today in Manhattan federal court. “Anything less than that would send the wrong message.”

Zvi, presumably, also viewed it as not one of his best days. It’s also of interest to upcoming main event Raj Rajaratnam, scheduled to be sentenced next week and whose sentence is presumably floored by Goffer’s. Raj, however, can take some solace from rumors that Judge Sullivan is particularly harsh on white collar offenders; he might do relatively better.

Here’s an update of our chart with Goffer added and with Judge Sullivan’s sentences broken out, suggesting that they are in fact above average: Read more »

Securities And Exchange Commission Charges Former Goldman Sachs Employee And His Accountant Dad With Insider Trading

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1. They (allegedly) committed securities fraud for a $57,000 profit.
2. It’s not like anyone ever told them TD Ameritrade records its calls.
3. When Alfred picked up the call waiting from Spencer, do you think they kept their chat strictly business or did Alfred also get on his case about any dad-type stuff?
4. “Chew into my profit” Read more »

Insider Trading On The Universe

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Here are some things that are happening:

- Oooh correlation is one oooh.

- The SEC has proposed rules that would ban banks from “betting against” securitizations that they create for one year after marketing them, a sort of anti-Abacus rule.

- The SEC is also investigating whether people traded on inside information ahead of the S&P’s downgrade of the U.S. Amusingly:

It isn’t clear if securities regulators also are looking at trading of U.S. Treasurys. Inside information might not have been a blessing with these securities. Investors who bet against U.S. government debt suffered losses immediately after S&P’s downgrade because rattled stock investors retreated into Treasurys as a safe haven. Such losses wouldn’t be a defense against accusations of insider trading, lawyers said.

- Raj Rajaratnam may be going to jail for a million billion years for talking to some people about some stuff and then buying and selling some stocks. The Times is seeing him off with this bizarre quote:

The question is whether such a sentence — longer than the average federal prison term for murder — is appropriate. “Given the magnitude of the crimes, it’s hard to feel any pity for him,” said Harlan J. Protass, a defense lawyer …

These things seem puzzling – with the puzzle being, what do we want out of our capital markets?
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Backdating, Part II: This Time It’s Charitable Donations!

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We’re on record as skeptics of the great backdating scandal of 2006. But just because you think something was unduly scandalized by an over-eager financial press and over-zealous regulators doesn’t mean it didn’t happen. And there is clear evidence that backdating occurred. In fact, in some sectors—we’re looking at you Silicon Alley tech—it seems to have been a quite common practice.
Now one of the finance professors whose 1997 research helped scholars and reporters at the Wall Street Journal uncover the option-backdating scandal may have discovered another form of backdating, Zubin Jelveh reports on Portfolio.com. It seems that some 20% of chief executives who donate stock to family foundations have suspiciously well-timed the gifts. They make the donations prior to declines in their company’s stock, which suggests that they are either front-running bad news by donating based on insider information or are marking their donations to dates before the announcement of bad news. The former looks like something like insider trading and the latter like backdating.

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