I'm not saying extortion is the easiest thing to pull off but you'd think, what with the industry's skittishness about insider trading these days, that if you went to any given fund and threatened to expose them for trading on material non-public info unless they did exactly as they were told, i.e. shoved a bunch of unmarked hundos in a few trash bags and sent them your way, you could probably make out pretty well, no muss no fuss. Bonus points if you could say you were like a priest or rabbi or some other type of "spiritual adviser." That's what Rabbi Milton Balkany thought anyway, and it would've turned out great had his target, an unnamed Connecticut hedge fund not felt the need to get the authorities involved, according to a complaint filed yesterday, effectively ruining everything.
In a criminal complaint filed in federal court in Manhattan, prosecutors said that Mr. Balkany, 63, had recently been serving as a "spiritual adviser" to a federal inmate who told him that a Connecticut hedge fund had used inside information to profit from a number of stock trades.
The hedge fund was not named in the complaint, but prosecutors said that Mr. Balkany went to lawyers for the fund and told them that unless they handed over $4 million -- $2 million of which would go to Bais Yaakov -- he would instruct the inmate to tell the authorities about the insider trades.
According to the complaint, Mr. Balkany told the lawyers that government officials were eager to speak with the inmate -- something prosecutors said was a lie. But Mr. Balkany called the United States attorney's office in Manhattan in January and encouraged officials to speak with the inmate, prosecutors said.
On Thursday, Mr. Balkany received two checks totaling $3.25 million, the complaint said, adding that the rabbi told a hedge fund representative that the inmate would not discuss the fund with the government. He was arrested later that afternoon.