Archive for the ‘USA & Canada’ Category

The Telegraph writes that two more individuals connected to US hedge fund Greenlight Capital have been fined over a multi-million pound insider-dealing case.

New York Times writes about the fallen hedge fund billionaire Raj Rajaratnam received the longest prison sentence ever for insider trading on Thursday, capping an aggressive government campaign that has ensnared dozens and may help deter the illegal use of confidential information on Wall Street.

Judge Richard J. Holwell of Federal District Court in Manhattan sentenced Mr. Rajaratnam, 54, the former head of the Galleon Group hedge fund, to 11 years in prison. A jury convicted Mr. Rajaratnam of securities fraud and conspiracy in May after a two-month trial.

“Insider trading is an assault on the free markets,” said Judge Holwell, who also imposed a $10 million fine and ordered Mr. Rajaratnam to forfeit $53.8 million in ill-gotten profits. “His crimes reflect a virus in our business culture that needs to be eradicated.”

The sentence was a watershed moment in a two-year push by federal prosecutors. Over that period, Preet S. Bharara, the United States attorney in Manhattan, has brought charges against 54 people with insider trading crimes. Of those, 50 have been either pleaded guilty or have been convicted at trial. Three others’ situations are pending, and the fourth is a fugitive.

Yet the crackdown on insider trading — a crime whose victims are not always apparent — has come at a time when many Americans have questioned why authorities have not pursued charges against bank executives over their role in the financial crisis, which still weighs on the economy.

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The Securities and Exchange Commission today charged a former Goldman, Sachs & Co. employee and his father with insider trading on confidential information about Goldman’s trading strategies and intentions that he learned while working on the firm’s exchange-traded funds (ETF) desk.

The SEC’s Division of Enforcement alleges that Spencer D. Mindlin obtained non-public details about Goldman’s plans to purchase and sell large amounts of securities underlying the SPDR S&P Retail ETF (XRT). He tipped his father Alfred C. Mindlin, a certified public accountant. Father and son then illegally traded in four different securities underlying the XRT with knowledge of massive, market-moving trades in these securities that Goldman would later execute.

The case marks the SEC’s first insider trading enforcement action involving ETFs.

“With his father’s helping hand, Spencer Mindlin exploited his inside knowledge of Goldman’s complex hedging strategies to line his own pockets,” said George S. Canellos, Director of the SEC’s New York Regional Office.

Sanjay Wadhwa, Associate Director of the SEC’s New York Regional Office and Deputy Chief of the Market Abuse Unit, added, “We are aggressively working to identify and prosecute illegal insider trading across multiple markets and derivatives products regardless of the complexity of the trading pattern that we have to unravel in our investigations.”

According to the SEC’s order instituting proceedings against the Mindlins, the insider trading occurred in December 2007 and March 2008. Goldman was the largest institutional holder of the XRT in order to allow its customers to short the XRT. To hedge its long position in the XRT, Goldman shorted the individual securities underlying the XRT.

The SEC’s Division of Enforcement alleges that by virtue of his position on Goldman’s ETF desk, Spencer Mindlin knew Goldman’s current nonpublic position in the XRT and Goldman’s nonpublic plans to trade large amounts of securities underlying the XRT in order to hedge its position in the XRT. Spencer and Alfred Mindlin began purchasing and selling the four individual securities underlying the XRT within months after Spencer Mindlin joined Goldman’s ETF desk. They placed almost all of their trades in a brokerage account in the name of another family member. Spencer Mindlin failed to disclose his and his father’s trading to Goldman.

According to the SEC’s order, Spencer Mindlin learned on multiple occasions about Goldman’s trading intentions through e-mail communications he received shortly before he and his father placed their trades. In one instance when Alfred Mindlin phoned TD Ameritrade to upgrade the family member’s account to allow for the trading of options, he received a call on another line from Spencer Mindlin while on hold with the TD Ameritrade representative. Because the TD Ameritrade call was recorded, Spencer and Alfred Mindlin’s conversation discussing a trade was captured on tape. In later instances, Spencer Mindlin impersonated his father on at least four calls to TD Ameritrade. On one call, he instructed the firm not to execute a trade too early in the day because this would “chew into my profit – my profit on this trade.” The Mindlins obtained at least $57,000 in illicit profits through their insider trading.

The SEC’s Division of Enforcement alleges that by engaging in the misconduct described in the SEC’s order, the Mindlins willfully violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The proceedings will determine what relief, if any, is in the public interest against the Mindlins, including disgorgement of ill-gotten gains, prejudgment interest, financial penalties, and other remedial relief.

The Money Times wrote about another inside information case, but rather different this time.

A Walt Disney Co. administrative assistant and her boyfriend were caught trying to sell inside information regarding the company’s earnings. Both of them were arrested Wednesday morning in Los Angeles.

Walt Disney Co.’s head of corporate communications, Zenia Mucha’s assistant Bonnie Hoxie and her boyfriend Yonni Sebbag plotted to sell confidential Disney information to investment companies. The duo sent out mails to about 33 companies, including hedge funds, offering to share Disney’s quarterly earnings report with them in exchange of money.

Releasing Disney’s confidential information

“Hi, I have access to Disney’s (DIS) quarterly earnings report before its release on 05/03/10,” read the letter, sent Mar 5. “I am willing to share this information for a fee that we can determine later.”

The United States attorney for the Southern District of New York has charged the two with conspiracy and wire fraud. Hoxie, 33, and Sebbag, 29, could face up to 25 years in prison and a $250,000 fine, if convicted on all charges.

A federal judge released Hoxie on a $50,000 bond but ordered that Sebbag must be held as a potential flight risk. The U.S. Securities and Exchange Commission has also sued the two.

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MSNBC wrote: A former top executive at a $1 billion hedge fund investment firm was sentenced to more than two years in prison Friday in the first sentencing to result from what prosecutors have called the largest hedge fund insider trading case in history.

Mark Kurland, 61, of Mount Kisco, N.Y., was sentenced Friday to two years and three months in prison and ordered to forfeit the $900,000 he made through illegal trades by a judge who blamed the attitudes of people like Kurland on the country’s financial collapse two years ago.

U.S. District Judge Victor Marrero said Kurland, a co-founder of New Castle Partners hedge fund in Manhattan, “frankly should have known better” than to join an inside trading scheme that led to the arrests of top executives including one-time billionaire Raj Rajaratnam.

“He had a choice as a leader of the financial industry. He could have led by example. Instead, he chose to follow. He became a joiner, surrendering to the spree of the financial market’s virtual mob mentality that nearly brought down this country’s financial industry in the quest for ever bigger and faster gains,” Marrero said.

Kurland, who had pleaded guilty to conspiracy to commit securities fraud and securities fraud, was among 11 people who have pleaded guilty in the case. Many of the others had agreed to cooperate with the government, a step which delays their sentencing.

Rajaratnam, the portfolio manager for the Galleon Group hedge fund, has pleaded not guilty and disputed government claims that he pocketed as much as $50 million through a network of cheating executives at financial firms and companies privy to inside information.

The judge criticized pleas for leniency on Kurland’s behalf on the grounds that he had a minimal role, that he did not benefit much financially, that others were more at fault and that there was no real harm to the markets.

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CNBW writes that the US Supreme Court has refused to hear former Qwest CEO Joseph Nacchio’s appeal of his insider trading conviction. The court said Monday it would not entertain Nacchio’s request that he either be acquitted of the charge or granted a new trial.

Prosecutors said Nacchio sold $52 million worth of stock in 2001 while knowing that Denver-based Qwest Communications International would have trouble meeting its sales goals. Nacchio began serving a six-year sentence on April 14. He contended the jury was given improper instructions about what internal information had to be disclosed publicly.

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The Securities and Exchange Commission today charged Richardson, Texas resident Reza Saleh with insider trading around the public announcement of Dell Inc.’s tender offer for Perot Systems earlier this week.

The SEC alleges that Saleh made increasingly large purchases of Perot Systems call options contracts based on material, non-public information that he learned in the course of his employment with, or duties for, two Perot-related private companies and Perot Systems. Immediately following the tender offer announcement on Monday, September 21, Saleh sold all of the call option contracts in the accounts and reaped approximately $8.6 million in illicit profits.

Later that same morning, SEC staff with assistance from the Options Regulatory Surveillance Authority identified Saleh as a suspicious trader. Soon after being contacted by SEC staff, Saleh acknowledged to a Perot Systems director that he knew about the impending transaction when he traded.

“The overwhelming evidence in this case allowed the SEC to move quickly against the trader before he could spend the huge profits from his illegal trading,” said Rose Romero, Director of the SEC’s Fort Worth Regional Office. “The Commission is seeking a court order to freeze Saleh’s assets.”

According to the SEC’s complaint, filed in federal court in Dallas, Saleh purchased 9,332 Perot Systems call option contracts through two brokerage accounts between Sept. 4 and Sept. 18, 2009. The call option contracts were set to expire in October 2009 and January 2010. Saleh sold all of the call options following the announcement as Perot Systems’ stock price immediately increased by approximately 65 percent.

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