Wednesday, 23 July 2014
Last updated 14 hours ago
May 19 2011 | 2:25pm ET
The 22nd guilty plea in the Galleon Group insider-trading scandal has offered the first concrete link between that case and the raid of four hedge funds last year by the Federal Bureau of Investigation.
According to a plea agreement unsealed yesterday in Manhattan federal court, former Diamondback Capital Partners portfolio manager Anthony Scolaro admitted to insider-trading in November. The same month, authorities raided the offices of four hedge funds, including Diamondback.
Diamondback—and two of the other hedge funds, Level Global Investors and Loch Capital Management—has not been accused of any wrongdoing. All three firms say that authorities have assured them that they are not the subjects of the insider-trading probe, but Diamondback added that the raid was focused on a portfolio manager, presumably Scolaro, who had not been previously identified.
The raids, which also hit Barai Capital Management, were not previously tied to the Galleon case, and instead were thought to be solely part of the Justice Department's more recent crackdown on insider-trading that has produced a dozen arrests, including that of Barai founder Samir Barai, and six guilty pleas, including those of two former SAC Capital Advisors traders.
But Scolaro's guilty plea identifies him as a member of the Galleon insider-trading circles. Scolaro, who is cooperating, told a judge in December that he received confidential information from Franz Tudor, a former Galleon trader then at Schottenfeld Securities. Scolaro said that Tudor later told him that "the source of the information was a lawyer who was working on the deal."
Lawyers at law firm Ropes & Gray were allegedly the primary source of inside information for former Galleon and Schottenfeld trader Zvi Goffer, whose trial in the case began on Monday.
Tudor, who pleaded guilty in 2009, wore a wire in conversations with Goffer and Michael Kimelman, one of Goffer's co-defendants; the other is his brother, Emanuel. Tudor later worked at Incremental Capital, the hedge fund founded by Goffer after he left Schottenfeld.
The Goffers and Kimelman, like Galleon founder Raj Rajaratnam before them, have pleaded not guilty. Rajaratnam was convicted last week of 14 counts of insider-trading.
Scolaro is the 27th person known to be charged in the Galleon case.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…