Wednesday, January 18, 2012
The Wall St. Journal reported earlier today on arrests of seven people in New York, Boston and California on insider trading charges, which the newspaper describes as "a broadening of the government's long-running investigation of employees of public companies sharing confidential information with hedge-fund analysts and traders." Among those arrested were a former portfolio manager at Diamondback Capital Management, an analyst with Sigma Capital Management (an affiliate of SAC Capitol Advisors) and a co-founder of former hedge fund group Level Global Investors. WSJ, Federal Officials Charge Seven in Insider Probe .
The SEC soon followed and announced charges against two hedge fund advisory firms and the same seven fund managers alleging a $78 million insider trading scheme about Dell’s quarterly earnings and other similar inside information about Nvidia Corporation.
The SEC alleges that a network of closely associated hedge fund traders at Stamford, Conn.-based Diamondback Capital Management LLC and Greenwich, Conn.-based Level Global Investors LP illegally obtained the material nonpublic information about Dell and Nvidia and in turn tipped several others. According to the SEC’s complaint, the illicit gains in the Dell insider trades exceeded $62.3 million, and the illicit gains in the Nvidia insider trades exceeded $15.7 million. The SEC’s complaint seeks a final judgment ordering the defendants to disgorge their ill-gotten gains plus prejudgment interest, ordering them to pay financial penalties, and permanently enjoining them from future violations of these provisions of the federal securities laws.