In Depth: FBI Says Hedge Fund Analyst Made Millions Through Insider Trading
Nov 25 2014 | 7:12am ET
By Neil Weinberg, David Glovin and Patricia Hurtado (Bloomberg) -- The FBI files spell it out: An analyst at Citadel LLC, the hedge fund with $23 billion in capital invested globally, told agents he made millions of dollars trading on information from a company insider.
It was December 2011, and the Justice Department was deep into a seven-year investigation into illegal stock tips. As authorities homed in on people at several other hedge funds over leaks from a Dell Inc. employee, agents at the Federal Bureau of Investigation began questioning the Citadel analyst about the friendship he formed with the same Dell insider.
In confidential FBI reports summarizing those interviews, agents recounted how the Citadel analyst received market- sensitive information from the Dell employee in 2008 and 2009. In one trade he told agents he made, the analyst bet against Dell after learning it would announce disappointing earnings, bringing in $5 million to $6 million when the company’s shares fell by more than 10 percent. He told agents he later discarded records.
The analyst discussed helping the Dell employee hunt for a Wall Street job, the agents wrote. “It became an ‘I’ll scratch your back if you scratch mine’” relationship, they wrote in a summary of a Jan. 4, 2012, interview with the Citadel analyst.
Nine people at five investment firms were eventually convicted in part for trading on tips from inside Dell.
Neither the analyst, Richard Farmer, nor the Dell employee, Rob Ray, was sued by regulators or prosecuted. Chicago-based Citadel hasn’t been accused of wrongdoing.
http://www.finalternatives.com/node/29121
Nov 25 2014 | 7:12am ET
By Neil Weinberg, David Glovin and Patricia Hurtado (Bloomberg) -- The FBI files spell it out: An analyst at Citadel LLC, the hedge fund with $23 billion in capital invested globally, told agents he made millions of dollars trading on information from a company insider.
It was December 2011, and the Justice Department was deep into a seven-year investigation into illegal stock tips. As authorities homed in on people at several other hedge funds over leaks from a Dell Inc. employee, agents at the Federal Bureau of Investigation began questioning the Citadel analyst about the friendship he formed with the same Dell insider.
In confidential FBI reports summarizing those interviews, agents recounted how the Citadel analyst received market- sensitive information from the Dell employee in 2008 and 2009. In one trade he told agents he made, the analyst bet against Dell after learning it would announce disappointing earnings, bringing in $5 million to $6 million when the company’s shares fell by more than 10 percent. He told agents he later discarded records.
The analyst discussed helping the Dell employee hunt for a Wall Street job, the agents wrote. “It became an ‘I’ll scratch your back if you scratch mine’” relationship, they wrote in a summary of a Jan. 4, 2012, interview with the Citadel analyst.
Nine people at five investment firms were eventually convicted in part for trading on tips from inside Dell.
Neither the analyst, Richard Farmer, nor the Dell employee, Rob Ray, was sued by regulators or prosecuted. Chicago-based Citadel hasn’t been accused of wrongdoing.
http://www.finalternatives.com/node/29121
