Insider-Trading Charges Against Hedge Fund Manager Tossed

Sep 23 2010 | 1:17pm ET

A federal judge has dismissed the insider-trading case against hedge fund manager Nelson Obus.

U.S. District Judge George Daniels tossed the Securities and Exchange Commission lawsuit against Obus, the president of Wynnefield Capital, another Wynnefield employee, Peter Black, and General Electric Capital’s Thomas Strickland. The SEC alleged that Strickland passed along a tip to Black, who in turn passed it to Obus, who allegedly used it to make a trade that earned him $1.34 million.

“The SEC has not produced facts sufficient to prove that Strickland breached a duty to his employer, nor has it demonstrated the requisite degree of deceptive conduct on the part of any defendant,” Daniels ruled.

The SEC accused Strickland of tipping off his friend, Black, about the impending acquisition of SunSource Inc. by Allied Capital Corp. in May 2001. Black allegedly told his boss, Obus, who allegedly used it to buy up 287,200 shares of SunSource on June 8 of that year—99% of the shares that changed hands on that day—turning a profit for three hedge funds run by Obus.

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