Friday, 30 January 2015
Last updated 12 hours ago
Feb 10 2011 | 12:24pm ET
The fallout from the insider-trading charges leveled against four hedge fund employees this week continued as prosecutors offered more details from one of their cooperating witnesses and speculation continued about the hedge funds mentioned in the criminal complaints.
One fund that requires no further speculation is Citigroup's Tribeca Global Management. According to the Securities and Exchange Commission's lawsuit, the defunct Citi hedge fund is "Hedge Fund A" in the complaint against hedge fund manager Samir Barai. And it allegedly earned more than $450,000 in illicit profits in 2006 and 2007 from the insider-trading scandal.
Barai worked at Tribeca in those years before leaving to found Barai Capital Management. He was one of four people revealed to have been charged in the case this week and faces securities fraud, conspiracy and obstruction of justice charges.
Barai allegedly traded on confidential information about chipmaker Fairchild during and after his tenure at Tribeca. According to the complaint against him, he paid his source about $48,000 for the information between October 2006 and October 2009.
Citigroup said it is cooperating with the investigation.
As for the other hedge funds in the complaints' alphabet (and number) soup, "Hedge Fund B" in the criminal complaint is Barai Capital Management, "Hedge Fund C" is Empire Capital, where Longueuil worked from 2004 through 2008, "Hedge Fund D" is SAC Capital Advisors or SAC's CR Intrinsic unit, where Longueuil worked after leaving Empire, "Hedge Fund E" is Sonar Capital Management, where Noah Freeman, who has pleaded guilty in the case, worked before joining SAC, and "Hedge Fund F" is SAC.
In the Securities and Exchange Commission's civil case, "Hedge Fund #5" is Sonar, "Hedge Fund #6" is Empire and "Hedge Fund #7" is SAC. Hedge funds two through four remain unidentified; no one at those firms has been charged with any wrongdoing, and they are included in the complaint as recipients of information from the expert-network consultants arrested last year.
Neither Empire nor SAC nor Sonar have been accused of any wrongdoing.
Meanwhile, prosecutors yesterday unsealed the transcript of Freeman's Monday plea hearing.
"Some of the people with whom I—from whom I received information were based in other states, including California, New York and Texas, and others were abroad including in Taiwan," Freeman told a federal judge. The locations seem to match those of several people indicted in the case; Winifred Jiau, a former consultant for expert-networking firm Primary Global Research, is a Taiwanese citizen, while Barai and Longueuil, who prosecutors allege traded information with Freeman, were both based in New York. Primary Global itself is based in California, and Mark Longoria, another former Primary Global consultant charged in the case, worked for Advanced Micro Devices in Texas.
Freeman also admitted that he paid for tips and "shared the information I received with others and I received similar information from them."
Freeman is cooperating with the investigation.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…