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Galleon Inquiry Expands, As Implicated Quadrum Capital Shuts Down; SAC Connection Uncovered

Tyler Durden's picture


As the Galleon inquiry expands, we have been fairly certain that the dominoes would start falling. Whether or not one of these dominoes would be the fund that single-handedly defined the term "information arbitrage" is still anyone's guess, although as the WSJ reports today, a former employer of Stevie Cohen's until the year 2004, Richard Grodin, has received a subpoena for his trading records as part of the Galleon case. It appears that upon learning of the Feds sniffing around his 500 Fifth Avenue office, Mr. Grodin promptly shut his current hedge fund and got out of dodge.

Richard Grodin is (or rather was) head of SEC unregistered Quadrum Capital Management, which as Dealbreaker disclosed a few days ago was forced to promptly shut down, meaning that Mr. Grodin was well aware the allegations were about to start flying, and that judging by the haste of the shut down, there is much more to the story than mere allegations. Attempts by Zero Hedge to reach any of its principals listed below have so far been futile. One person who is sure to be saddened by this is Doug Leggate, Citi's former #2 oil analyst, who in the summer of 2008 left Citigroup to join the now defunct fund.

The common link in the case appears to be cooperating witness Choo Beng Lee, who worked with Grodin at another SAC-sponsored hedge fund called Stratix which was closed in 2007.

From the WSJ:

Mr. Cohen runs SAC's main hedge fund and has invested money on
behalf of his investors as well as his own money in funds run by former
SAC managers. Over the years, Mr. Grodin has worked as a portfolio
manager for SAC, as well as a division that invested SAC investors'
money. He also ran a separate independent fund in which Mr. Cohen was
an investor.

It is unclear which specific trades of Mr. Grodin's and their timing
are being sought. The 6-foot-5 Mr. Grodin, 40 years old, took time away
from his hedge fund this summer to play in a basketball tournament in
Israel, a person familiar with the matter says.

Mr. Grodin and Choo Beng Lee, who has been identified as a
cooperating witness in the government's case, have ties that stretch
back to the late 1990s when the two worked for SAC, people familiar
with the matter say. Mr. Grodin was a portfolio manager and Mr. Lee was
an analyst that worked with him.

Several years later, Mr. Grodin broke away from the main SAC fund to
work at Sigma, an SAC division, where Mr. Grodin continued to work as a
portfolio manager and Mr. Lee continued to serve as an analyst for him.
Mr. Lee's lawyer declined to comment.

Mr. Grodin later launched a hedge-fund named Stratix outside of
SAC's sphere, in which Mr. Cohen was an investor. At Stratix, Mr. Lee
worked for Mr. Grodin for several years, according to people familiar
with the matter. Mr. Grodin closed Stratix in December 2007.

How many more people will be uncovered as a result of this sting operation is unclear, although our bet is that much more than just 10 will ultimately be implicated. And just as all roads lead to Rome, all cases of insider trading ultimately are the result of some form of information arbitrage. Whether a publicity shy Mr. Cohen will have an official statement regarding his relationship with Grodin is as of yet unknown. Then again ole' blue eyes, who enjoys closing his multi-billion dollar fund flat at the close of each trading day, may just have bigger problems on his hands these days.


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Sat, 10/24/2009 - 15:14 | Link to Comment anynonmous
anynonmous's picture

Quadrum for a moment I thought I read Quadrangle

Sat, 10/24/2009 - 15:51 | Link to Comment Anonymous
Mon, 10/26/2009 - 10:30 | Link to Comment John Self
John Self's picture

If there's enough publicity, the feds will absolutely go after Cohen without a smoking gun.  Take a look at the track record of the Enron Task Force on appeals.  In the garden variety crime, you can count on the prosecutors leaving well enough alone in all cases except those that they have a reasonably strong case on.  But when the media lights are shining and the big-name pols are calling, everything goes out the window and prosecutions begin, absenc eof evidence be damned.

Sat, 10/24/2009 - 15:52 | Link to Comment Anonymous
Sat, 10/24/2009 - 16:35 | Link to Comment Bruce Krasting
Bruce Krasting's picture

Wow. This thing is spinning out of control. Let's see, on one hand we have an over bought market and on the other there is hedge fund liquidation. October's not over.

Sat, 10/24/2009 - 17:11 | Link to Comment deadhead
deadhead's picture


Sun, 10/25/2009 - 12:07 | Link to Comment anynonmous
anynonmous's picture


Sat, 10/24/2009 - 16:42 | Link to Comment Rollerball
Rollerball's picture

I thought all roads led to Tel Aviv.

Sat, 10/24/2009 - 19:38 | Link to Comment Shylock81611
Shylock81611's picture

What the fuck does that mean?

Sun, 10/25/2009 - 06:16 | Link to Comment PrDtR
PrDtR's picture MEANS he is either an islamic fanatic OR just an idiot!  hehe


Sat, 10/24/2009 - 17:16 | Link to Comment Careless Whisper
Careless Whisper's picture

How often do SAC traders call analysts and try to get them to change the rating on a stock SAC has a position in? Anyone? Anyone?

Sun, 10/25/2009 - 07:31 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Me, me. Pick me. My hand is up, see? Come on, don't ignore me. Yes! 

My answer is 284,592,773, give or take a few.

My real question is this. How many other overflowing foul smelling turd filled septic tanks still need to be cleaned up after they pump this one out?

And why do I have this feeling in my bones that the only reason this particular septic tank is getting pumped out now is because they drew the short straw or they pissed off some very powerful people and this is their reward.

Speaking from personal experience, there is never just one cockroach, regardless of whether we're talking about the two or six legged variety.


Sat, 10/24/2009 - 17:41 | Link to Comment Anonymous
Sat, 10/24/2009 - 17:50 | Link to Comment Anonymous
Sun, 10/25/2009 - 12:01 | Link to Comment Careless Whisper
Careless Whisper's picture

Tontine - oh pleeasse.  Does anyone know what that means? lol.


Sat, 10/24/2009 - 18:07 | Link to Comment Anonymous
Sat, 10/24/2009 - 19:37 | Link to Comment Shylock81611
Shylock81611's picture

There's gonna be more singing than at church on Sun.!


The rats will come out like the lights are out and cheese is on the table.


Of course, the politics may kill an investigation the way that it killed the Steve Jobs inquiry.


The equity market is far more important than the rule of law--of course.

Sat, 10/24/2009 - 19:37 | Link to Comment Anonymous
Sat, 11/07/2009 - 23:37 | Link to Comment milbank
milbank's picture

Now that's what I call "Too Big To Fail" or, more appropriately in this case. . .

"Too Big To Jail."

Sat, 10/24/2009 - 19:39 | Link to Comment Anonymous
Sat, 10/24/2009 - 20:42 | Link to Comment Anonymous
Mon, 10/26/2009 - 09:18 | Link to Comment Roy Batty
Roy Batty's picture

You are correct.  They had people on the payroll at all levels of certain energy/oil companies, including right on the rigs.  I'm not kidding.

Sun, 10/25/2009 - 00:06 | Link to Comment ToNYC
ToNYC's picture

One year A.L. (After Lehman) yet seems like only 45 minutes after the Titanic met the 'berg in another time compression. The early lifeboats were not really thought of as the survivors....come back in an hour, next year.

Sun, 10/25/2009 - 00:34 | Link to Comment Tripps
Tripps's picture

the SEC needs to pursue Stevie Cohen/SAC and all the relationships with all these other offshoots



this guy has been linked to naked shorting crews as well


wouldn't doubt if they already have a strong case against these guys. the best traders all have an unnatural edge why can't we admit it?

Sun, 10/25/2009 - 16:14 | Link to Comment Anonymous
Sun, 10/25/2009 - 16:42 | Link to Comment Anonymous
Sun, 10/25/2009 - 23:59 | Link to Comment Anonymous
Mon, 10/26/2009 - 00:02 | Link to Comment Anonymous
Do NOT follow this link or you will be banned from the site!