SEC Trumps Up Charges Against Network of ‘Experts’ Involved in Insider Trading, Tags 6 More
Hard on the heels of an insider trading lawsuit filed against expert networks professing to provide professional investment research, the Securities and Exchange Commission has amended its initial complaint to include a New York-based hedge fund and four hedge fund portfolio managers and analysts to the list of defendants.
On February 3, four technology company employees moonlighting to provide consulting services to Primary Global Research LLC (PGR) were initially charged for illegally tipping hedge funds and other investors with inside information regarding the stocks of technology firms like AMD, Apple, Dell, Flextronics, and Marvell.
The initial defendants have raked hundreds of thousands of dollars in sham consulting fees according to the SEC.
In its amended lawsuit, the SEC alleged that the insider trading scheme has generated more than $30 million in illegal profits from trades using nonpublic material information about the stock of AMD, Seagate Technology, Western Digital, Fairchild Semiconductor, and Marvell.
All defendants agreed to settle SEC’s charges.
“The greed continued with the hedge funds and their principals who corruptly arranged to receive this stolen information and to trade using that information for profit,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
He added that the detailed, company-specific information about earnings, sales, top-line revenue, and product orders were used in the insider trading to generate ‘fast money’.
The four hedge fund portfolio managers and analysts allegedly received “illegal tips from the expert network consultants and then caused their hedge funds to trade on the inside information,” the amended complaint stated.
New defendants to the insider trading allegations included Samir Barai of New York, founder and portfolio manager of Barai Capital Management, Jason Pflaum of New York, former technology analyst at Barai Capital Management, Noah Freeman of Boston, Mass., former managing director at a Boston-based hedge fund, and Donald Longueuil of New York, a former managing director at a Connecticut-based hedge fund.
“These trusted employees chose to steal information that belonged not to them, but to the company and its shareholders. They lined their pockets with tens of thousands of dollars by trafficking in that stolen information in a manner that is not unlike an employee who drives to the loading dock late at night and fills the trunk of his car with valuable office equipment and sells it to his neighbor,” Khuzami said.