7 Charged In $78 Million Inside Trading Case
January 19th, 2012The point is that LOTS of people who aren’t corporate insiders know the news before the market does.
—Insider Crimes, Funny Money and Options Rackets
Via: AP:
Greed on Wall Street set a new record, federal authorities said Wednesday as they unveiled a massive insider trading case charging a hedge fund co-founder with engineering a trade that earned a staggering $53 million in profits.
The illegal trade — the largest transaction ever prosecuted in Manhattan — was part of a $78 million scheme involving at least seven financial industry professionals, U.S. Attorney Preet Bharara told reporters.
“Today’s charges illustrate something that should disturb all of us: They show that insider trading activity in recent times has, indeed, been rampant and routine and that this criminal behavior was known, encouraged and exploited by authority figures in several investment funds,” Bharara said.
Of the $78 million, nearly $62 million was earned through tips provided by a Dell Inc. employee to a former Dell worker who spread the information among his friends at at least five investment houses, including three hedge funds. Bharara called it “a stunning portrait of organized corruption on a broad scale” and said it raised to 63 the number of people arrested in a government crackdown on insider trading. So far, there have been 56 convictions.
“Each wave of charges and arrests seems to produce leads to lead us to the next phase,” said FBI Assistant Director-in-Charge Janice K. Fedarcyk.
She said the arrests were not the last in a 4-year-old probe dubbed Operation Perfect Hedge.
“If you are engaged in insider trading, what distinguishes you from the dozens who have been charged is not that you haven’t been caught; it’s that you haven’t been caught yet,” she said.
The criminal complaint in U.S. District Court in Manhattan charged four of the men with conspiracy to commit securities fraud and securities fraud, among other charges. Three analysts charged in the other documents have already pleaded guilty and are cooperating with the government.
Related: They Made a Killing: The Use of Knowledge of Covert Operations in the Stock Market
I was deep in the industry when Enron was cut by more than 60% – nobody but nobody seemed to know why it was happening. Utilities should have been stalwarts when tech crashed, but it was just “buy on weakness” all the way for us outsiders.
Insider trading is the rule, not the exception. Period. I exited the markets personally by end of 2001, quit client business altogether the next year, and have never participated since. I wish I could still play the markets, I really do. But I won’t do it on principle. It’s just not our game to play anymore, it’s theirs. Even more so in recent years.
I did try to justify all my work and understanding by struggling to grasp how the game was fundamentally changing. In this regard I feel now that Soros’ famous quote is paramount: it’s only by exiting the false trend before it’s exposed that you keep whatever you’ve won. And the false trend in recent years is a big one – ‘virtual’ wealth is being realized for what it is.
In reality, this should obviously be a ‘real’ trend, but so far it’s not still not being perceived so….which is what makes it scary to me. There’s still such lengths go before it’s done. Is seemingly ‘real’ wealth somehow ‘virtual’ as well? Are assets like land and animals and gardens only more illusion of security? Time will tell. We’re still a ways from that end-game. And in the meantime, we’re still cultivating family and community as a hedge…
Lots of very wealthy people will lose nearly everything in short time. That’s going to happen, it’s already foregone. I feel it should have happened already, but c’est ce que c’est. The true ‘insider hedging’ has (unfortunately, in my mind) happened already. The epochal changes that many such as Kevin saw coming simply didn’t happen quickly enough to usher in real revolution. Instead, whatever comes will only undoubtedly be hailed as a ‘catastrophe’ for the vast majority who couldn’t prepare themselves, who will allow themselves to be consoled by the prescient ‘insiders’ as “victims of misfortune”.
I’ve gone past the point of caring as far as any substantive revolution is concerned, so it’s just history as usual from here on out. I’ve done my thing, which is as much as I could. Life is getting finer and fuller for me.
@ Lagavulin
A highly insightful post, Mr. Scotch. Thanks for that. Clearly, individuals operating at the top of the game — and it is quite obviously one big game of Three-Card Monty at this point — are fully aware of the nature of what they do.
Unlike yourself, however, conscience doesn’t seem to enter into their decision making processes.
Now more than ever, I remain convinced that the world is actually being run by the most talented and predatory of the sociopaths and the blue-blooded patrons who collect them like Hummel figures.
“The epochal changes that many such as Kevin saw coming simply didn’t happen quickly enough to usher in real revolution.”
That’s precisely why the changes happened as slowly as they did… to forestall revolution.
I could have told you in the 90s where we were headed. The people I DID tell, simply thought I was bonkers. Many of them still think so and I’ve mostly given up: people simply don’t want to know.
I could have told you in the Spring of 2001 that ‘we’ would be “going into Afghanistan in the Fall” because I read it in the NY frickin’ Times which, if you read the entire paper (who has the time/interest?) you do learn what’s going on.
I gave up a nearly 30 year habit of reading the Times around 2003 because you can learn the same things, without deciphering all the TimeSpeak code, much more quickly on the ‘net’.
VERY well said Tal…
This is EXACTLY the drum I keep banging away at here, in regard to the “magic” nature of words and the “programming” taking place right before our very eyes. An act of genuine alchemy, entraining minds via the forward projection of “reality” in the mass media under the guise of “expert” prognostication.
TimeSpeak is a highly useful turn of phrase. Do you mind if I borrow that meme now and again?
Indeed, the bulk of the population simply do not want to accept anything that makes a dent in whichever flavor of programming they cling to with all their might. Can not. Will not. Do not.
Clinging to the comfort, convenience and “safety” offered by the mainstream illusion of same.
All of which leads me back toward another thread a few clicks down the page, on the subject of Meyers-Briggs typology and what it might mean to the nature of individual character and social interaction.
Placed into a real-world context, it may well explain the “ostrich” response that mystifies people like you — and me. Seen this way, it makes things like blind faith and conformity MUCH easier to understand, if no less frustrating to deal with…