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

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.