Insider Trading: Rumours Circulate Of A Big Story About To Hit Wall Street
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Rumours are circulating in the press that a huge story may be about to break around a massive insider trading investigation conducted by the FBI.
Speculation has already begun on whether it will result in criminal charges or significant civil fines against Wall Street traders and executives.
One US government official – speaking on the condition of anonymity – was quoted as saying “We are far along in investigations of insider trading”.
Rumours are circulating in the press that a huge story may be about to break around a massive insider trading investigation conducted by the FBI.
Speculation has already begun on whether it will result in criminal charges or significant civil fines against Wall Street traders and executives.
One US government official – speaking on the condition of anonymity – was quoted as saying “We are far along in investigations of insider trading”.
So far it isn’t clear whether the FBI is conducting one sweeping investigation or looking into various smaller instances of the suspected insider trading.
Another source close to the story characterized the investigation as a “big case”, saying that it would most likely result in arrests before the New Year, with defendants numbering in double digits.
That same source said that the basis of the investigation grew out of an enquiry into the Galleon Group.
Galleon group was one of the largest hedge fund management firms in the world before announcing its closure in October 2009. The firm was at the centre of an insider trading scandal that resulted in investors pulling capital from the firm rapidly.
News of the investigation has already circulated on the Business Insider, the Wall Street Journal and the New York Times’ website.
The WSJ article says that insider trading charges from the investigation “could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation.”
Business Insider says the investigation also focuses on “expert networks” that pay industry insiders to talk to hedge funds and other institutional investors.
In the early 2000s the expert networks, were seen as a great way to get inside information. In the following years, the companies tightened their compliance procedures.
The US government is clearly taking a close look at current practices.
According to another anonymous source, Goldman Sachs is among the firms under scrutiny. The person said the inquiry involved several low-level Goldman employees but not executives.
A Goldman spokesman, Michael DuVally, declined to comment.
The US Justice department and the Securities and Exchange Commission have been taking an increasingly aggressive public stance in pursuing insider trading on Wall Street.
In a speech last month, Preet Bharara, United States attorney in Manhattan said: “Illegal insider trading is rampant and may even be on the rise,” “Disturbingly, many of the people who are going to such lengths to obtain inside information for a trading advantage are already among the most advantaged, privileged and wealthy insiders in modern finance.”
Any new charges are likely to come on top of an already widespread insider trading case billed by Mr Bharara’s office as “the largest hedge fund insider trading case in history”
That case has already snared a number of money managers, including the Galleon co-founder Raj Rajaratnam.
Recently two more Wall Street traders were revealed to have pleaded guilty to securities-fraud charges, the 13th and 14th people to plead guilty in the criminal case.
In all, 23 people have already been charged criminally in the investigation.
Earlier this month a judge sentenced Ali Hariri, a former executive at Atheros Communications, a technology company, to 18 months in prison for his participation in the Galleon case.
Prosecutors alleged that Mr. Hariri provided a hedge fund manager with inside information relating to his company.
The “sentencing provides another reminder of how pervasive insider trading has become and the lengths to which corrupt insiders will go to misuse confidential information for their own personal gain,” Mr. Bharara said in a statement. “It should also remind those who might contemplate similar crimes that we will ultimately find you, prosecute you and convict you.”
The New York Times compares the rhetoric of Preet Bharara to that of Rudolph W. Giuliani in the 1980s. Giuliani was the United States attorney in Manhattan at that time and prosecuted numerous Wall Street executives for insider trading using laws that were – at the time – rarely enforced.
