Ex-Hedge Funder Cooperating In Insider Trading Case

Dec 17 2010 | 9:41am ET

A former hedge fund analyst is among those cooperating with the federal insider-trading investigation, which produced four more arrests yesterday.

An unidentified person called CW-5, or cooperating witness 5, in the complaint against the employee and three consultants at Primary Global Research, is described as having formerly worked at a New York hedge fund as an analyst. It is unclear what hedge fund the person may have worked for; he or she has not yet been charged but is cooperating with hopes for a reduced sentence, prosecutors said.

"CW-5 has admitted to participating in obtaining material, non-public information relating to public companies and providing that information to others," the complaint alleges.

The complaint identifies another person with hedge fund ties, former SAC Capital Advisors trader and Spherix Capital founder Richard Choo-Beng Lee, as cooperating witness 1. Lee, who pleaded guilty in the Galleon Group insider-trading case, also helped authorities nab the first person arrested in the current probe, Don Chu of Primary Global.

Three other cooperating witnesses were not identified. One is a former employee of Primary Global who, like CW-5, has admitted to obtaining and giving out confidential information. Another is described as a Dell manager, believed to be Daniel DeVore, who pleaded guilty last week, and the fifth as another person with "substantial experience evaluating public companies in the semiconductor and technology industries" who has also pleaded guilty to fraud charges.

CW-5, whose hedge fund was a client of Primary Global, told investigators that one of the former Primary Global analysts arrested yesterday, Mark Longoria, provided confidential information about Advanced Micro Devices, where he worked. CW-5 said he gave the information to his funds' portfolio manager, who then made several trades based on it.

Meanwhile, James Fleishman, the Primary Global account representative arrested, was released on $700,000 bail. In a taped phone call between Fleishman and Longoria, Fleishman allegedly sought to reassure his consultant, who was worried when AMD was identified as one of the stocks traded in the Galleon case. Fleishman told Longoria that Galleon was not a Primary Global client.

Longoria was also released, on a $50,000 bond. Longoria's lawyer told The Wall Street Journal that his client was cooperating with the investigation.

Longoria seemed to indicate as much, when he told the judge in Texas who granted his bail, "I'm not trying to fight this."

One of the other former Primary Global consultants arrested yesterday, Manosha Karunatilaka, probably saw it coming for months. The Taiwan Semiconductor Manufacturing Co. employee was approached by the Federal Bureau of Investigation this summer and asked to cooperate with the investigation, Reuters reports. Among the hedge funds Karunatilaka worked with was Level Global Advisors, one of three hedge funds raided by the FBI last month.

Level Global has said that the government has assured it that it is not a target of the investigation.

In Depth

Related-Company Fees: Normal Industry Practice or Conflicted Compensation?

Nov 11 2015 | 4:23pm ET

Regulatory agencies as well as investors are increasingly exploring whether certain...


Ferrari Roars in Wall Street Debut

Oct 21 2015 | 4:28pm ET

Shares of supercar maker Ferrari jumped as much as 15 percent to a high of nearly...

Guest Contributor

Private Debt - What is the Opportunity?

Nov 11 2015 | 3:28pm ET

In this contributed article, Rob Allard, founding partner of Firebreak Capital...


Editor's Note

    Oct 21 2015 | 10:41am ET

    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…