SAC Capital linked to insider trading? Who knew!

As you encounter conversations on this topic in the days to come, it is a good opportunity to point out that Deep Capture published irrefutable evidence of insider trading at short selling hedge funds SAC Capital, Kynikos Associates and Third Point Partners almost one year ago.

Reuters reports that Richard Choo-Beng Lee will testify that he “engaged in illegal insider trading while working at Steven Cohen’s SAC Capital, a Connecticut-based hedge fund.”

I’m predicting that much will be made of this development, and rightly so.

As you encounter conversations on this topic in the days to come, it is a good opportunity to point out that Deep Capture published irrefutable evidence of insider trading at short selling hedge funds SAC Capital, Kynikos Associates and Third Point Partners almost one year ago.

Read about it here: “Hedge funds reading tomorrow’s headlines today

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14 comments
  1. I am surprised they let the SAC connection out so soon in the midst of an investigation? Does that seem like a heads up for Cohen? Think we’ll see a few big boyz rounded up?

  2. Ssacrosanct

    The idea that custodians can sell the asset you give them in trust for safekeeping. They are allowed to use accounting tricks such as swaps, repos, options, etc. to pretend they still own the asset they dumped and pushed down in value at your expense.

    These custodians are from the bankster family “fractional reserve” mentality where as long as they know you will never withdraw it, they can fractionally own it. They are the people that are against letting you ask for your share certificate, which would transfer ownership from them to you.

    Expendable

    Traders like Steve Cohen that made a lot of money naked shorting (the verb) as opposed to failing to own what was supposed to be in custody (the noun).

    Limited Hang out

    Don’t let them get away with it. It’s not about naked shorting. It’s about custodians FRAUDULENTLY (arrestable, go to jail, do not pass go go) pretending to own an asset on your behalf, then sending you a statement (mail fraud, interstate wire fraud) pretending they still own that asset.

    For whatever reason, fractional reserve banking is legal, but fractional reserve brokering is not. If a brokerage, clearing house, the gd DTC engages in it, then their officers and directors should be arrested.

  3. ok, we have insider trading.

    The SEC is trying to make it look like their finally doing their job. Yes, it is great about these arrest and even more arrest to come. please keep that great work up.

    But, the problem the SEC needs to address and make arrests is about Goldman Sachs secret software. They arrested a Goldman Sachs employee in July 2009 as he tried to steal Goldman Sachs secret software. The news media reported the story on a late night on Saturday during the July fourth holday week-end and then burried the story.

    This is huge and needs to have been all over the news and the news media covered it up.

    The SEC needs to discuss and make arrest on NAKED SHORT SELLING and hold Goldman Sachs accountable for their crimes as they have stolen billions off investors using their secret software and naked short selling.

    Richard Keane
    http://www.twitter.com/stockshockmovie

  4. November 5, 2009 6:49 PM
    Ropes & Gray Lawyer Arrested in Insider-Trading Probe

    Posted by Brian Baxter

    Federal prosecutors have filed criminal charges against 20 hedge fund managers, traders, corporate executives, and at least two lawyers in connection with the government’s crackdown on insider-trading, report several news sources.

    Arthur Cutillo

    Arthur Cutillo (pictured right), an IP litigation associate in the New York office of Ropes & Gray, is one of the individuals charged in the scheme. (Click here for a recruiting bio of Cutillo.)

    According to a criminal complaint filed against seven of those charged, the 33-year-old Cutillo is alleged to have provided inside information on three transactions on which Ropes advised private equity clients: TPG and Silver Lake’s $8.2 billion acquisition of Avaya in June 2007, TPG’s $1.3 billion acquisition of Axcan Pharma in November 2007, and Bain Capital’s $2.2 billion acquisition of 3Com in September of that year. (Ropes is known for its strong private equity practice and has advised Bain and TPG on several high-profile deals, including a $17.9 billion buyout of radio giant Clear Channel and $28.1 billion sale of Alltel to Verizon last year.)

    A Ropes spokesman released the following statement to The Am Law Daily: “We are deeply disappointed about this situation, which suggests an extreme breach of this person’s duty of trust to our clients and to the firm. We cannot comment in detail on an ongoing investigation but we are moving quickly to protect our clients and are cooperating fully with authorities.” Cutillo’s c.v. has been removed from the firm’s Web site.

    “It certainly sounds like this [probe] is widening,” says Bradley Simon, a former federal prosecutor and founder of New York’s Simon & Partners. “And while it’s still unclear at this point how far and wide this thing permeates, if it involves a lawyer at a large firm there’s no telling how far this will go. It’s almost like a virus.”

    Another individual arrested in the investigation, Michael Kimelman, a trader and founding partner of Incremental Capital, previously worked as an associate at Sullivan & Cromwell. (Hat Tip: The Business Insider.)

    According to a civil complaint filed by the SEC against Cutillo and six other defendants on Thursday, a third defendant, 31-year-old Jason Goldfarb, is an attorney in private practice in New York. New York State Bar Association records show only one lawyer with that name in private practice in Brooklyn–an associate at personal injury firm Brecher Fishman Pasternack Walsh Tilker & Ziegler. Sibling publication the New York Law Journal spoke with a name partner at the firm about the allegations against Goldfarb.

    The SEC complaint was the second such complaint filed on Thursday related to insider-trading. An amended civil complaint was also filed in the case against the Galleon Group hedge fund and its billionaire founder Raj Rajaratnam, charging alleged government informant Roomy Khan and 12 additional individuals and entities with participating in a $33 million insider-trading scheme.

    The two SEC complaints are separate but involve some individual overlap. Three individuals and one entity–employees of New York trading firm the Schottenfeld Group–charged in the amended Galleon complaint are also named in the Cutillo complaint. Sources familiar with the government’s investigation say that while some of the individuals are the same, the alleged schemes themselves differed.

    “The trading took place in different securities and there were different sources for the information,” says one source, who requested anonymity. “These are two different matters that have been filed separately, but there is some overlap in the individuals involved.” Adds another: “Some of these people had their fingers in both pies.”

    The SEC case in the Cutillo matter is being handled by lawyers in Washington, D.C., while the regulatory body’s New York regional office is overseeing the Galleon case.

    The government’s criminal complaint against Cutillo reads at certain points like an episode of The Wire, with the defendants meeting in cars, paying each other off in cash, and using prepaid cell phones to pass tips to one another. Prosecutors claim that Cutillo was the focal point of an insider-trading scheme that generated $53 million in illegal profits.

    Both Cutillo and Goldfarb made appearances late Thursday before U.S. magistrate judge Theodore Katz in Manhattan. The New York Law Journal reports that Cutillo was represented by Bryan Blaney of Norris McLaughlin & Marcus in New York, while Goldfarb turned to Harvey Greenberg of New York’s Greenberg & Wilner. Neither lawyer was immediately available for comment.

    The use of wiretaps on individuals suspected of committing white-collar crimes continued to surprise some defense lawyers.

    “Wiretaps are not frequently used because they are expensive, difficult to obtain, and time-intensive in terms of manpower and resources,” says Michael Gurland, a former federal prosecutor and assistant district attorney in Manhattan who now cochairs the white-collar defense group at Chicago’s Neal, Gerber & Eisenberg. “We usually see them being used in major drug and gang-related investigations, not insider-trading cases that are usually built on an inference of guilt from circumstantial evidence like banking, trading, and phone records.”

    On Wednesday, lawyers for the SEC in the Galleon civil case told U.S. district court judge Jed Rakoff that prosecutors intended to charge more individuals with insider-trading. Rakoff set December 15 as a deadline to add additional parties in the case. It appears law enforcement officials didn’t need nearly that long, and prosecutors have stated publicly that their investigation is continuing.

    “The funny thing about wiretaps is that I’ve never seen one where it didn’t wind up picking something else,” says Andrew Hruska, a member of the government investigations practice at King & Spalding and a former federal prosecutor. “Agents are supposed to stop listening to conversations if they don’t have to do with the designated activity, but there is an exception if you hear people talking about unrelated criminal conduct. You can always get the [wiretap] application amended.”

    Manhattan assistant U.S. attorneys Andrew Fish, Reed Brodsky, and Marc Litt–a former Am Law Litigator of the Week for putting Bernard Madoff behind bars–are handling the Cutillo criminal case for the government.

    ( http://amlawdaily.typepad.com/amlawdaily/2009/11/ropes-gray-lawyer-arrested-in-insidertrading-probe.html )

  5. Complete New Galleon Insider Trading Documents

    New York City authorities announced charges today against 14 additional Wall Street professionals and attorneys surrounding the Galleon insider trading scandal. Here are the documents released by the DA >>> Those named:

    1.STEVEN FORTUNA, formerly a Managing Director of S2 Capital LLC (“S2 Capital”), a hedge fund based in Boston, Massachusetts;

    2. ALI FAR, founder of Spherix Capital LLC (“Spherix”), a hedge fund based in California;

    3. RICHARD CHOO-BENG LEE, former President of Spherix;

    4. ROOMY KHAN, a California trader who served at certain times as a paid consultant to a hedge fund based in New York, New York; and

    5. GAUTHAM SHANKAR, a proprietary trader at Schottenfeld in New York, New York.

    6. ZVI GOFFER (pictured here), who formerly worked at The Schottenfeld Group LLC (“Schottenfeld”), a broker dealer in New York, New York, and currently operates a trading firm called Incremental Capital (“Incremental”), in New York, New York;

    7. ARTHUR CUTILLO, an attorney at the law firm of Ropes & Gray LLP in New York, New York;

    8. JASON GOLDFARB, an attorney in New York, New York;

    9. CRAIG DRIMAL, who worked in the offices of the Galleon Group in New York, New York, but is not employed by Galleon;

    10. EMANUEL GOFFER, who formerly worked at Spectrum Trading LLC, a trading firm in New York, New York, and currently is associated with Incremental in New York, New York;

    11. MICHAEL KIMELMAN, currently associated with Incremental in New York, New York;

    12. DAVID PLATE, formerly employed by Schottenfeld, and currently associated with Incremental in New York, New York; and

    13. ALI HARIRI, a Vice President of Atheros Communications, Inc. (“Atheros”) in California.

    14. DEEP SHAH, who was formerly employed by Moody’s Investors Service, Inc. (“Moody’s”), in New York, New York, remains at large.Join the conversation about this story

    »See Also:Insider Trading Prosecutor: “We Are Not Finished”Zvi Goffer: Galleon’s Size Made It Easy To Hide Insider TradingDetails Of The Latest Insider Trading Charges

    ( http://quotes.stocknod.com/stocknod/?GUID=10674394&Page=MediaViewer )

  6. Does this mean SAC might be let off hook?

    http://online.wsj.com/article/SB125746971902632491.html

    “According to Mr. Lee’s plea agreement, the U.S. attorney’s office has agreed not to prosecute Mr. Lee for inside trading from “about 1999 to in or about 2004 in connection with Mr. Lee’s employment with a certain hedge fund located in Connecticut.” The hedge fund referenced in the plea agreement is SAC Capital, according to a person close to the situation.

    A spokesman for SAC Capital declined to comment.”

  7. Seems like evryone has had their hand in the cookie jar huh? And to answer your question above Anon.. I DON’T THINK SO!!

    Ex-Jefferies Money Manager Contorinis Is Indicted (Update3) Share Business ExchangeTwitterFacebook| Email | Print | A A A
    By David Glovin

    Nov. 6 (Bloomberg) — Joseph Contorinis, a former money manager for the Jefferies Paragon Fund, was indicted by a federal grand jury on fraud charges in what prosecutors said was a $7.2 million insider-trading ring.

    The indictment by the Manhattan grand jury follows Contorinis’s February arrest. Another person charged with him, Nicos Stephanou, who was an associate director of mergers and acquisitions at UBS AG’s London office, pleaded guilty in May to charges that he passed information about bids for Albertson’s Inc., the Boise, Idaho-based grocery store chain.

    “Stephanou had access to and learned material information about merger and acquisition transactions,” the indictment says. “Stephanou provided Contorinis, and others known and unknown, with UBS insider information” from 2004 to 2006.

    The conspiracy and securities fraud indictment comes as federal prosecutors step up their scrutiny of insider trading. Prosecutors in Manhattan yesterday announced charges against 14 people in a wide insider ring and previously accused six others, including Galleon Group founder Raj Rajaratnam, of trading on secret tips. Today’s indictment isn’t related to the Rajaratnam case. An indictment marks the formal commencement of the case against Contorinis. Prosecutors will now be required to provide him with details of their case.

    Contorinis’s attorney, Benjamin Rosenberg, and Stephanou’s lawyer, Christopher Morvillo, didn’t immediately return calls.

    Charges against a third defendant, Ramesh Chakrapani, a managing director of Blackstone Group LP’s takeover advisory unit, was dismissed in April, according to court records.

    Albertson’s

    According to the indictment, Contorinis used secret tips to trade in shares in Albertson’s before its acquisition. Zurich- based UBS, Switzerland’s largest bank, represented a private- equity firm in the deal, the indictment says.

    Stephanou, a citizen of Cyprus who lives in London, was arrested at Newark Liberty International Airport in New Jersey on Dec. 27. He was among UBS advisers assigned to help Cerberus Capital Management LP prepare bids with a group of investors for Albertson’s in 2005 and 2006, the Securities and Exchange Commission said in a related civil lawsuit.

    He tipped at least three people to developments in the deal, including friend and ex-colleague Contorinis, the agency said. The pair had both worked as analysts at the New York office of Credit Suisse First Boston in 1998 and 1999, the agency said.

    The case is U.S. v. Contorinis, 09-maj-289, U.S. District Court, Southern District of New York (Manhattan).

    To contact the reporter on this story: David Glovin in U.S. District Court in New York at 9245 or [email protected].

  8. caught up with b-school buddies at Third Point, SAC not too long ago. They’re both quite worried about the whole Galleon thing because they all engaged in the very same things Galleon did. Good luck sleeping at night guys!

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