Feds probe insider trading

The investigation centers on whether multiple trading rings reaped illegal profits totaling tens of millions of dollars. The FBI raids the offices of three hedge funds.

By Charley Blaine Nov 22, 2010 3:59AM
Updated: 9:20 p.m. ET

Agents of the Federal Bureau of Investigation raided the offices of three hedge funds today as part of what appears to be a wide-ranging probe of insider trading in the financial industry.

The searches of the three funds appears to be part of a wide-ranging probe that's three years old.

Authorities are said to be getting ready to file charges that "could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation," The Wall Street Journal reported over the weekend. (Registration may be required.)
The story suggested that the probes "could eclipse the impact on the financial industry of any previous such investigation."

Although it's still not clear what charges will be filed, they could end up making public a number of ways insider trading has become a common practice among large groups of traders, sources told the Journal.

The investigations seemed to take a particular focus on the pervasive practice of hiring "expert network" services that provide access to insiders and former insiders at companies for traders who want to obtain the scoop on an industry.

Investigators are also looking into whether Goldman Sachs (GS) disclosed transactions, including health care mergers, in a way that benefited certain investors. The question was whether non-public information was passed along that speculators could trade on.

Goldman Sachs shares closed down 3.4% to $161.05.

Some charges could be filed before the end of the year, the Journal said.

Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research in Portland, Ore., sent an e-mail on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.

The agents were hoping Kinnucan would help in the probe. But the e-mail made clear Kinnucan was not prepared to do so.

According to the Journal, the e-mails were sent to

traders at, among others: hedge-fund firms SAC Capital Advisors and Citadel Asset Management, and mutual-fund firms Janus Capital (JNS), Wellington Management and MFS Investment Management.

Today's FBI hedge-fund raids were conducted on funds that are run by former managers of Steve Cohen's SAC Capital Advisors.

Level Global Investors, based in Greenwich, Conn., is run by David Ganek, a former SAC Capital trader and art collector. He started Level Global in 2003 and earlier this year reported managing about $4 billion in assets.

Diamondback Capital Management, founded in 2005, is managing $5 billion in assets. It's also in nearby Stamford, Conn.

Another FBI official said the agency also searched a third site, at 30 Federal St. in Boston. Hedge fund Loch Capital Management has its headquarters at that address.

A spokesman for Level Global acknowledged the raid took place today.

"We can confirm that agents from the Federal Bureau of Investigation visited our offices this morning as part of what we believe to be a broader investigation," the spokesman said in a statement.

"We are cooperating fully with the authorities and, at the same time, we are fully operational and continue to work diligently for the benefit of our investors."

Any charges would be on top of those filed in an existing case centered on the hedge fund Galleon Group and its founder Raj Rajaratnam, Reuters said today.

Twenty-three former hedge-fund managers, lawyers, traders and others have faced criminal or civil charges in that case, which prosecutors have called the largest hedge-fund insider-trading case ever. Fourteen have pleaded guilty to criminal charges, eight have pleaded not guilty, and one is at large.

Nov 23, 2010 11:19AM
they bag a few guys once a year to make it look like they are watching the hen house.  anyone who doesn't think insider info is rampant is a fool. 
Nov 22, 2010 12:35PM

Don't want to play in a rigged market, and "these guys" will kill their own firms in the process!


Time to head for the exits!

Nov 23, 2010 10:23AM
Until some of these guys are prosecuted and put in jail this is just rattling of the sabers. The SEC needs to gain back the trust of the American people after Madoff.....I am just not sure they ever can.
Nov 23, 2010 6:43AM

No can or does trust any financial institution and rightly so. Banks USED to provide services in exchange for use of our money. Now it is, "What fees can we charge?" Rememebr ATM's were to save banks money because they would not have to hire so many tellers for simple customer transactions? Now they are profit centers.


Brokers work only for themselves. Their clients are fools to be fleeced.


I could go on and on. The hustlers and crooks are now in charge and doing more damage to this economy than the Mafia. Our politicians (all of them) are cheap W*&res and "big shot" wannabes.


Those whose jobs are to report on the financial industry are so attracted to the power and glamour of being able to dine with the right set that they cannot see anything. They are in bed with the crooks and are cheap floosies. They report rumors as news and never stop to think about what they are reporting and saying.


Honesty used to be the best policy. I think all of the above believe "honesty" is a suckers game.



Nov 22, 2010 10:20PM

Let's see a millionth of a cent per trade, a billion trades, equals $1,000. Big profit there.

The big boys skim off more then that. My old broker skimed 5% of the trade value.

Nov 22, 2010 4:28PM
LMFAO, what a joke........it took the feds this long, while you are at it, why not look into the futures trading on oil, where it has nothing to do with supply and demand, but more GS manipulation of the market....its time folks, watch them fall.........................million dollar bonuses on the backs of the taxpayers....................

Nov 22, 2010 3:12PM
There isn't a "market" anymore. There hasn't been one since the computer jockeys figured out how to milk 1/1,000,000th of a cent each out of a billion trades. Accumulation? Nope..Distribution? Nope... You have to be a certified moron to trade against the government-sponsored high speed boys...Prediction:  (Drum Roll) This "market" will end with lightning speed. Perhaps 15 minutes will elapse before the boys come to the realization that there are no bids and there will not be any bids...Bye Bye Golden Goose; Hello Government control!!  
Nov 22, 2010 3:01PM
Surprise Surprise not!  It took me $200,000 to figure it out, but I guess I'm a slow learner.
Nov 22, 2010 2:17PM
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