insider-trading

  • 17 Dec 2012 at 6:39 PM

Convicted Insider Traders Probably Regretting Association With Group Calling Itself “Fight Club”

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It gives me no particular pleasure to update the ol’ insider trading sentencing chart every time a new person is convicted of insider trading, but I view it as a public service for the less instinctually law-abiding among our readers and here we are:

After three days of deliberations, a jury convicted Anthony Chiasson, a co-founder of Level Global Investors, and Todd Newman, a former portfolio manager at Diamondback Capital Management. The two had denied charges that they participated in a conspiracy that made more than $70 million illegally trading technology stocks.

Anyway chart (background here):

As, like, half of Manhattan gets convicted of insider trading, this chart has gotten a bit raggedy; various forms of cooperation or sympathy or silliness of the sentencing guidelines will move you off the predicted lines. Read more »

  • 17 Dec 2012 at 2:21 PM

Doctor Who Tipped Off SAC Manager Wasn’t Conspicuous About His Wealth Except When He Was Telling Teenagers On Planes About All The Fancy Hotels And Limo Rides Insider Trading Afforded Him

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As you may have heard, in addition to the salary he was paid by the University of Michigan, Dr. Sidney Gilman made about $100,000/year through his side-gig advising “a wide network of Wall Street traders.”  That network included included Mathew Martoma, recently charged with running “the most lucrative insider trading scheme ever,” based on the information he received from Gilman, who made it a habit of leaking highly confidential drug trial data to the former SAC Capital employee. While most people that engage in fraud can’t help but spend their ill-gotten gains in a flashy way that attracts unwanted attention (expensive cars, private jets, chinchilla fur coats) the Times reports that Sid Gilman’s supplementary income “was not readily apparent in his lifestyle in Michigan.” For instance, no second home and no bragging to his colleagues about his life on Wall Street. Still, on at least one occasion, the doctor couldn’t help but let the underage girl sitting next to him on a flight home know that she was in the presence of a BSD. Read more »

  • 14 Dec 2012 at 12:49 PM

The Feds Are Struggling To Understand Why Mathew Martoma Won’t Just Turn On Steve Cohen Already, God Damn It

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“We have been remarkably successful in convincing persons to cooperate with the government, and provide evidence to us, and in court of law,” SEC director of enforcement Robert Khuzami said during a press conference the day the government went public with its charges of insider trading against former SAC Capital employee Mathew Martoma. To the untrained ear, Khuzami probably appeared to be speaking to no one in particular, just sending a general message to any would-be criminals out there that once the government got to their co-conspirators, it’d be all over. No one wants to do time, and everybody flips. To those who’ve been following Operations Perfect Hedge, though, and have watched the Feds’ relentless pursuit of Steven A. Cohen,  it was obvious they were sending a clear and direct message to the Big Guy: “We got ya boy, and ya goin’ down.” And since its track record of getting people to turn on their colleagues and in some cases, their best friends (see: Noah Freeman/Donald Longueuil, and these guys, and these guys, and this guy), really has been “remarkably successful,” and since Martoma has a wife and young kids and his whole life ahead of him, Khuzami and Co. probably assumed they had this one in the bag. But not so. Read more »

  • 03 Dec 2012 at 1:16 PM

David Slaine, Government’s Undercover “Tip-Mining Machine,” Apparently Under The Impression Insider Trading Works On A 3-Strike Basis

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Remember David Slaine? For those who need a refresher, he is the former Morgan Stanley managing director and ex-Galleon trader who began working as an FBI informant in 2007 and who was outed for doing so by the Wall Street Journal in January 2010. At the time, we learned a few notable things about Slaine, some of them germane to his role in helping the government go after people trading on material non-public information, others special in their own way, like:

1. He takes french fries, and perhaps all snacks, very seriously.

In 1993, Slaine triggered a fist-fight with a colleague on the trading floor after needling him because he wouldn’t share his french fries. Others broke up the fight.

2. He doesn’t wait for people to towel off and get dressed before knocking their teeth out.

One morning early in 2001, before trading began, Gary Rosenbach, then was the No. 2 executive under Mr. Rajaratnam, and Slaine were in a steam room together after exercising at an Equinox Fitness Club. Mr. Rosenbach was pressuring Mr. Slaine to improve his performance. As Mr. Rosenbach lay on his back on a bench, Mr. Slaine punched him, giving him a black eye and ending their friendship.

3. Humans aren’t the only ones often asked “you want a piece of me?”

He once smashed a computer keyboard in a fit of rage, says a person familiar with the incident.

4. While working on Wall Street, he eschewed the traditional channels of employee recruitment (Wharton, etc), preferring instead to pick up fresh analysts at the club.

While at Morgan Stanley, he met [Craig] Drimal, then a nightclub bouncer at the Vertical Club in Manhattan. The two quickly formed a friendship based on a shared passion for weight lifting and their mutual ability to bench-press 400 pounds…Shortly after arriving at Galleon, Mr. Slaine persuaded Galleon officials to give a position to Mr. Drimal, who then was working as a bouncer at the Roxy nightclub in Manhattan.

5. Being a person with whom he “formed a friendship based on a shared passion for weight lifting and [a] mutual ability to bench-press 400 pounds,” possibly the greatest line written about anyone who’s ever worked on Wall Street and which which cannot be said enough, means little in the long run if he knows you’ve been playing it fast and loose with securites laws.

In July 2007, the FBI showed up at Mr. Slaine’s door on W. 57th Street in Manhattan and confronted him. Mr. Slaine agreed to help the government. At the time, federal prosecutors in Manhattan were trying to make headway on another investigation that eventually led to the charges involving Galleon. They asked Mr. Slaine who he knew that might be participating in insider trading. Mr. Slaine’s answer: his friend Mr. Drimal, according to people familiar with the matter. In September 2007, Mr. Slaine—identified in the complaint as CS-1—tried out his body wire for the first time, meeting Mr. Drimal in New York. During the meeting, Mr. Drimal gave Mr. Slaine a piece of paper with four stock symbols, according to the complaint. He told Mr. Slaine the four companies were all acquisition targets. At the meeting’s end, Mr. Drimal told Mr. Slaine to destroy the list. He warned him to “be careful” in trading the securities because no news of the takeovers had surfaced publicly…After the meeting, Mr. Slaine went to a nearby hotel where an FBI agent was waiting, says a person familiar with the matter. The pair went to a room where Mr. Slaine removed the wire.

Anyway, Bloomberg recently checked in to see what Slaine’s been up to these last couple years and other than his “experience” with the FBI being “tremendously traumatic,” he seems to be doing pretty well. Read more »

  • 29 Nov 2012 at 3:09 PM

Insider Trading Pro Tip: IMing “i don’t want to go to jail” Won’t Make It Happen

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Once again we need to talk about insider trading. This SEC press release is about a pretty garden-variety case – allegedly, Thomas Conradt learned about IBM’s planned acquisition of SPSS from his roommate, told his friend David Weishaus, and the two of them bought lots of SPSS stock and call options and made what in hindsight probably looks like an inadequate amount of ill-gotten gains – but it teaches important insider-trading lessons both subtle and otherwise.

First, otherwise: instant messages don’t go away when you close the window! I know, weird, right? But they’re on the internet, and you can be pretty sure that if you IM your idiot buddy “I don’t want to go to jail,” (1) you will be seeing that IM in an SEC complaint and (2) you are going to jail:

Oops!1 But there is also a subtler lesson, having to do with the long and complicated path this information traveled. It started with a law firm associate who worked on the deal for IBM. He (unnamed, but called the “Associate”) was from Australia, and he had a friend (the “Source”) who was a research analyst and from New Zealand, and he told the Source. Source, in turn, had a roommate, and that roommate was Thomas Conradt, one of the dopes charged here. Here is a touching, yet legalese, description of their friendship: Read more »

  • 29 Nov 2012 at 12:42 PM

SAC Capital Invites Employees To Gather ‘Round For A Chat That Could Simply Be To Notify Everyone They’re Switching Fleece Manufacturers

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What? Anything is possible and that would be grounds for an all-staff call. You don’t know. Read more »

  • 28 Nov 2012 at 4:48 PM

Everybody’s Jumping On The Insider Trading Bandwagon

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It’s a tribute to Steve Cohen’s prescience/power/something that, on what is otherwise not a great day for SAC on the insider trading front, the rest of the news in the world is all pretty much “everybody is insider trading everything all of the time,” so, like, leave Steve alone! Today brings some old-fashioned mustache-twirling insider trading – here you can find the SEC’s charges against Delta Petroleum’s CEO, who apparently tipped his friends about an upcoming buyout and other news; those friends then sent each other emails saying things like “our mutual friend who will go unnamed WINK WINK WINK tells me that DPTR has good news coming MASSIVE NECK-STRAINING WINK” – but the real action is in these two Journal articles on what you might characterize as pervasive insider-trading-lite.

Who insider trades? Insiders, for one. This article about how executives have suspiciously good luck trading for their own account is perhaps too suspicious, as a lot of it is anecdotal or cherry-picked and it conflates 10b5-1 and discretionary trading a bit. Rule 10b5-1 plans, in which executives who do not have material nonpublic information set up automatic future sales (mostly) to top-tick the stock and/or pay for their kids’ college tuition, may have good or bad or indifferent results but you mostly can’t get mad at the executives if their 10b5-1 robots have suspiciously good timing; the robots really are mostly robots. On the other hand they’re not entirely robots and might be ripe for reforming; I’m like 75% on board with Ronald Barusch’s suggestions (I am not as troubled as he is by secret adoption of 10b5-1 plans during clean windows) but the bigger conceptual hole is that, as the Journal notes: Read more »

  • 28 Nov 2012 at 11:49 AM

Things Could Be A LOT Better At SAC Capital Right Now

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Back in October, we detailed a list of things that, if you are the hedge fund manager who goes by the name Steven A. Cohen, you really don’t want to hear first thing in the morning. They included: “The fleeces are on back order”; “Your ex-wife is in the lobby”; “There’s a photographer here who said he’s been authorized to shoot you wearing a king’s robe and crown for a set of playing cards”; and “You’ve been outmaneuvered for the Toledo Mud Hens. But I hear the Binghamton Mets may be available.” Today we must update that list to include another thing, perhaps THE thing, that people delivering news to Cohen don’t want to relay. Paraphrasing but any variants on: “Mr. Cohen, we’ve received a Wells notice and by the way, they’re considering naming you personally.” Read more »

Opening Bell: 11.28.12

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Gorman Enlists Morgan Stanley Workforce in Fiscal Cliff Campaign (Bloomberg)
Morgan Stanley Chief Executive Officer James Gorman called on the investment bank’s employees to pressure U.S. lawmakers into reaching an agreement that averts the so-called fiscal cliff. “No issue is more critical right now for the U.S. economy, the global financial markets and the financial well-being of our clients, which is why I am asking you to participate in the democratic process and make your voice heard,” Gorman wrote in a memo, a copy of which was obtained by Bloomberg News. The message went to about 30,000 U.S. workers including 16,000 financial advisers, said James Wiggins, a company spokesman.

Buffett Expects ‘Fiscal Cliff’ Fix, But Not By December 31 (CNBC)
Buffett didn’t outline a specific solution that he prefers, saying he could “go with any number of plans.” But he thinks the end result should have U.S. revenues at 18.5 percent of GDP and expenditures at 21 percent. Those levels would be “sustainable” because the ratio of the nation’s national debt to GDP wouldn’t increase, and might even fall over time.

SAC Capital Received a Wells Notice From SEC Last Week, May Be Subject to Civil Charges (CNBC)
Story developing.

EU Approves Spanish Banks’ Restructuring Plans (WSJ)
European Union regulators Wednesday gave the green light to nearly €40 billion ($51.78 billion) in euro-zone funding for Spain’s stricken bank sector, as it approved the restructuring plans for four lenders. BFA/Bankia, NCG Banco, Catalunya Banc and Banco de Valencia SA BVA.MC will require a total of €37 billion for their recapitalization plans, the regulators said. The European Union’s Competition Commissioner, Joaquin Almunia, said bondholders would face losses.

Will Italy Need A Bailout In 2013? (CNBC)
“We still see as our baseline scenario that Italy will likely be forced to ask for an international bailout at some point in 2013,” said Citi Analyst Giada Giani in a report on the country. “Italian economic fundamentals have not really improved, despite some improvement in market conditions. The negative feedbacks from fiscal austerity on growth have been severe, as the ability of the private sector to absorb fiscal tightening by lowering its saving rate is limited.”

EU Agrees New Controls for Credit Rating Agencies (Reuters)
European Union countries and the bloc’s parliament agreed on Tuesday to introduce limited controls on credit ratings agencies after their judgment was called into question in the debt crisis. Michel Barnier, the European commissioner in charge of regulation who helped broker a deal on the new law, said it aimed to reduce the over-reliance on ratings and establish a civil liability regime. The new rules should make it easier to sue the agencies if they are judged to have made errors when, for example, ranking the creditworthiness of debt.

Deutsche Bank Sued Over Home Mortgage-Backed Securities (Bloomberg)
Deutsche Bank, Germany’s largest lender, was sued by a trustee over claims that some securities sold by a unit of the bank were backed by home-mortgage loans taken out by fraudulent borrowers. DB Structured Products Inc.’s pool of more than 1,500 mortgages included more than 320 that were defective, HSBC Bank USA (HSBA), acting as trustee, said in a lawsuit filed yesterday in federal court in Manhattan. “Borrowers lied, with or without the knowledge of the loan originators themselves, concerning how much money they owed, how much money they made, whether and where they worked, and where they lived,” HSBC claimed. “A handful of instances of such inaccuracies is perhaps to be expected. Hundreds of instances of borrower dishonesty is not.” HSBC seeks unspecified damages and said Frankfurt-based Deutsche Bank must buy back the breaching loans under its agreements with the trustee.

Woman Jailed For Attacking Beau Over Bad Sex (TSG)
A Florida woman was jailed last night for a post-coital assault on her boyfriend, an attack the victim says was prompted when only he climaxed during a sexual encounter in the couple’s residence. Raquel Gonzalez, 24, was arrested Monday afternoon for felony domestic battery and booked into the Manatee County lockup, where bond has been set at $750. According to a Manatee County Sheriff’s Office report, Gonzalez and Esric Davis, 30, are “boyfriend and girlfriend who live in the same home and are involved in a sexual relationship.” Deputies noted that Davis and Gonzalez were “involved in sexual intercourse” when “Esric then climaxed and Raquel did not.” Which reportedly angered Gonzalez, who allegedly “began hitting and scratching [Davis], causing scratches near his eye and nose.” Davis told investigators that Gonzalez “goes off” frequently and that she had previously been physical with him. Read more »

  • 27 Nov 2012 at 12:22 PM

SAC Capital Invites Investors To Gather ‘Round For A Chat

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SAC Capital Advisors LP, the $14 billion hedge fund run by Steven A. Cohen, plans to hold a conference call with clients tomorrow, according to an investor who asked not to be named because the information is private. SAC executives have reached out to the firm’s largest investors to calm concern about Cohen’s trading in Elan Corp. and Wyeth LLC after prosecutors for the first time tied the hedge-fund founder to a specific transaction at the center of an insider-trading investigation. [Bloomberg, related, earlier]

Investors Don’t Want Their Hedge Funds To Get Caught Insider Trading

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Every publication today ran a story about how SAC investors are harrumphing around about pulling all their money out of SAC since the words “SAC” and “insider trading” seem to keep showing up in the same sentence and that sentence is sort of miscellaneously bad. Here is my favorite harrumph:

“Patience will be wearing thin among some investors after this latest accusation,” said Vidak Radonjic, managing partner at Beryl Consulting Group LLC in Jersey City, New Jersey, which advises clients on investing in hedge funds. “There is a pattern of potential compliance breaches and the money involved is getting bigger.”

I say unto you, the operative phrase there is “the money involved is getting bigger.”1 And I ask also unto you: if you were a passive investor in a hedge fund, and you found out and/or strongly suspected that your hedge fund was insider trading successfully, what would you do? I know what I’d do! You probably know what I’d do too.

Here is a hypothesis that may or may not be consistent with the facts: Read more »