Tuesday, February 8, 2011
The DOJ and SEC brought new charges in their expanding investigations into insider-trading between experts' networks and hedge funds. DOJ unsealed charges today against three former hedge fund portfolio managers and a hedge fund technology analyst. Two of the former managers, Donald Langueuil and Noah Freeman, previously worked at the hedge fund SAC Capital Advisors, which has not been charged with wrongdoing. The third former manager, Samir Barai, was founder of Barai Capital Management. Charges were also unsealed against Jason Pflaum, a technology analyst. WSJ, U.S. Targets Hedge Funds in Latest Wave of Insider Charges.
In addition, the SEC filed charges against the same defendants, alleging that they received illegal tips from expert network consultants and then caused their hedge funds to trade on the inside information. The scheme netted more than $30 million from trades based on material, nonpublic information about such companies as AMD, Seagate Technology, Western Digital, Fairchild Semiconductor, and Marvell. The SEC’s amended complaint alleges:
- Samir Barai of New York, N.Y., the founder and portfolio manager of Barai Capital Management, obtained inside information about several technology firms from company insiders, and then traded on the inside information on behalf of Barai Capital.
- Jason Pflaum of New York, N.Y., a former technology analyst at Barai Capital Management, obtained inside information about technology companies and shared it with Barai. After Pflaum shared the confidential information with him, Barai used it to illegally trade on behalf of Barai Capital.
- Noah Freeman of Boston, Mass., a former managing director at a Boston-based hedge fund, obtained inside information regarding Marvell and shared it with Donald Longueuil of New York, N.Y., a former managing director at a Connecticut-based hedge fund. Longueuil caused his hedge fund to trade on the inside information. Freeman also obtained inside information about another technology company and caused his hedge fund to trade on the nonpublic information.