Articles Posted in insider trading

In case you haven’t read some of the background of the worldwide hacker group doing insider trading, the actual facts surrounding the worldwide group that gained access since 2010 to news wire services including Business Wire and MarketWire, gaining access to tens of thousands of early releases on major business deals, reads like a Hollywood script fit for George Clooney and his friends in Oceans Eleven.

The Securities and Exchange Commission, investigating the 5 year hack, says that the coordinated ring of traders profited in excess of $100 million and possibly a lot more. According to reports, several Ukraine based hackers  penetrated the computers of the news services using stolen name and password information on to unscrupulous traders concerning major market affecting business news ahead of the actual news releases.

Those traders then took the information and bought stock in the companies involved.

Iftikar “Ifty”Ahmed, 1999 Harvard Business  School Grad and  Connecticut venture capital executive accused of insider trading and of cheating his clients out of tens of millions of dollars has fled the country, the U.S. Securities and Exchange Commission says.

Ahmed, a former general partner at Oak Investment Partners, left the United States  before May 18directly violating a judge’s order in an insider trading case . He had been restricted to traveling in only three US States.

The SEC says that his “recent flight from the United States” was a reason to expand an asset freeze to include various properties owned by Ahmed. A federal judge in Connecticut granted the request on Thursday.

The second U.S. Court of Appeals in New York has rendered a decision which expert say may harm  future insider trading prosecutions. In fact, the Department of Justice has already dropped charges against several defendants accused of trading on inside information, including some who pleaded guilty saying they could not prove the cases under the new legal precedents.

In December, the appellate court overturned the 2012 convictions of former hedge fund traders Todd Newman and Anthony Chiasson. The Court said that prosecutors must prove traders knew the person who gave them an inside tip gained some tangible reward for giving the tip. This week, the court declined to re-hear the case.

It is expected that many recently prosecuted for insider trading will seek dismissal of their case base don the ruling. Some observers suggest the decision might also lead the way for legislation.

Citing a recent U.S. court decision which narrows the definition of insider trading, Galleon Group hedge fund founder Raj Rajaratnam and former Goldman SachsGroup Inc director Rajat Gupta are seeking to overturn penalties imposed against them for insider trading. .

Rajaratnam, is trying to void a $92.8 million penalty in a U.S. Securities and Exchange Commission civil case and Gupta wants to throw out his criminal conviction. In arguing for lesser punishments, both men cited a Dec. 10 ruling by the 2nd U.S. Circuit Court of Appeals in New York that overturned two insider trading convictions, which said insider trading required knowledge that insiders who passed confidential tips did so in exchange for personal benefits “of some consequence.”

Rajaratnam, 57, was convicted of fraud and conspiracy over a variety of trades that prosecutors said generated $63.8 million of illegal profit. Gupta, 66, , was convicted of passing tips to Rajaratnam about Goldman’s financial results and an investment from Warren Buffett’s Berkshire Hathaway Inc.

Hedge funds and other investors using advanced internet technology can obtain documents ahead of “normal” internet users, sometimes a minute or more ahead, giving them a significant edge on the rest of the market. The question for business and legal scholars is why is this not insider trading?

According to The Wall Street Journal, the superfast, sophisticated trading firms, which set up direct lines to trade on stock are getting early delivery of corporate news releases from Business Wire, giving them just enough time to trade on the information before others do.

In addition these companies are getting documents faster through the SEC Edgar document distribution system

A former Merck & Co. Inc. pharma analyst from Cambridge was charged with insider trading for allegedly tipped off a business school classmate about  Merck’s interest in acquiring Cambridge-based, hepatitis C drug developer Idenix Pharmaceuticals Inc., before the purchase was announced this past June, court documents said.The Securities and Exchange Commission and federal prosecutors have filed a civil and criminal complaint against Zachary Zwerko. The info apparently  allowed the friend to make $683,000,authorities said.

Zwerko also told his friend that several pharmaceutical companies were interested in buying Ardea Biosciences, Inc., court records said. AstraZeneca PLC eventually purchased Ardea in 2012.

In both cases, the trader who is not named in court documents, purchased shares in the smaller companies before they were acquired and then sold them later for significant profits, authorities said.

The Securities and Exchange Commission has  announced that a group of golfers may have pocketed illegal profits on nonpublic information resulting in alleged illegal insider trading. There are also criminal charges pending. The allegations involve  trading of shares of American Superconductor Corporation(AMSC), a technology company based in Massachusetts, based on insider information.

A federal grand jury on Friday indicted Eric J. McPhail of Waltham and Douglas A. Parigian of Lowell on criminal charges of conspiracy and securities fraud. The US Securities and Exchange Commission filed civil charges against Parigian, McPhail, and five friends on Friday. Continue reading

 

The 2nd U.S. Circuit Court of Appeals in New York heard arguments in the case of  a former portfolio manager at the hedge fund is deciding whether recipients of non-public information can be found guilty of insider trading without any requirement prosecutors prove they knew the source of the tip benefited from the disclosure.