The Securities and Exchange Commission (SEC) is investigating whether traders are using exchange traded funds (ETF’s) to hide insider trading. ETF’s are a relatively new product that can be bought and sold like stock. ETF’s are desgined to track the price of a designated index like Standard & Poor’s 500 or the Dow Jones Industrial Average. ETF’s may be used to profit from a single stock rising while disguising trading patterns and a trader with inside information could purchase an ETF that holds the company’s stock and short the other stocks in the portfolio. This is known as ET stripping. The information on the SEC interest in EFT’s comes on the heels of arrests yesterday on insider charges of Harvard grad Noah Freeman and Donald Longueil from SAC as well as Harvard Business School alum Sam Barai, founder of Barai Capital Management. These individuals and others were charged with insider trading as part of a national crackdown on the practice. The U.S. Attorney’s Office has said that arrests in the investigation of insider trading regarding employees of Primary Global Research (PGR) and that the investigation is widespread and long-term. 46 people have been arrested in the case and 29 have plead guilty. Many of those who have plead guilty are cooperating with the government, revealing detailed information which is expanding, strengthening and building the government’s case. There is detailed evidence showing destruction of documents and emails in an attempt to cover up the crimes alleged. There are also text messages and emails implicating those who have been charged. In one case, an individual cut up his USD computer drive and deposited the parts in different garbage cans. SAC Capital Investors of Stamford Connecticut says it is cooperating with authorities. It is not known as to whether the fund itself or its founder Steve Cohen will be charged for any reason. Yesterday, a CitiGroup Hedge Fund was linked to the insider trading ring. According to the criminal complaint filed in federal court and a lawsuit by the SEC, the CitiGroup hedge fund made over $450,000 by trading in securities of Fairchild Semiconductor International after obtaining inside information. The investigation as to who was involved is expected to be part of the federal arrests that are ongoing.