The Galleon Insider Trading Net Expands, Will SAC Be Caught Next?

With over 30 people arrested or cooperating with the US Attorney General in the biggest insider trading bust in history, one can be sure that as many of those wishing to avoid jail time sing, many more arrests will undoubtedly come. Will this investigation impact "information arbitrage" specialist SAC (as Zero Hedge has speculated)? As of now the firm has gone through unscathed, although the net may be closing in on the 72 Cummings Point Road behemoth. After all, why would the SEC attempt to place its informant back with Steve Cohen's $12 billion hedge fund unless they had prior reason to be suspicious, and unless Richard Lee had advised them of improprieties handled by the man who trades 10% of the NYSE's (declining) volume daily. An arrest implicating billionaire Steve Cohen would likely make (or destroy) the political career of whoever the attorney prosecuting him. Which is why any evidence better be ironclad.

The widening investigation of insider trading on Wall Street is
expected to examine transactions at Steven A. Cohen's SAC Capital
Advisors, one of America's largest and most successful hedge funds,
according to people familiar with the matter.

A plea agreement between the government and a cooperating witness in
the investigation, Richard Choo Beng Lee, indicates that Mr. Lee has
agreed to provide information to prosecutors about a hedge fund where
he worked between 1999 and 2004. That firm is SAC, according to people
familiar with the matter.

In March 2009, after striking the deal to assist the government, Mr.
Lee sought to get rehired by Mr. Cohen, people familiar with the matter
say. Mr. Cohen declined to hire Mr. Lee because he was suspicious about
the recent and abrupt closure of Mr. Lee's hedge fund, Spherix, these
people say.

A nice map of the various relationships as the emerge is provided by the WSJ:

In the meantime, it may not be a bad idea to keep an eye out for any and all totally unnecessary and very much obtrusive pool cleaning vehicles belonging to Acme Corp. (full not of chlorine powder but ultrasonic sound interception devices) in front of 30 Crown Lane, Greenwich.

Comments

[Careless Whisper]

I have a feeling that a lot of those yellowed colored Defendants in the map will very quickly be converted to blue colored Cooperating Witnesses in a search for the big fish.

[DaveyJones]

you've got to go through yellow and blue to reach the real green

[Anonymous]

I have said many times the guy is a crook. Unbelievable returns are simply that - not believable. Can't wait to see him in cuffs. And yes, very good point, the little canaries are going to sing sing sing.

I am grateful that there finally are people in the justice system he can't buy - I am convinced he has been buying AG's off for years.

[DaveyJones]

Does Sachs Tip off SAC Capital?

 http://aaronandmoses.blogspot.com/2009/08/does-goldman-sachs-tip-off-sac-capital.html

[tom a taxpayer]

Thanks for the link that leads to Goldman Sachs through SAC. Perhaps this Galleon criminal case will be the case that leads ultimately to the downfall of the major crime organizations on Wall Street. This is a target rich environment, and the criminal activities (fraud, Ponzi schemes, insider trading, extortion, looting of treasury, cover-ups, etc.) are continuing today. So the investigation can begin anywhere, say with Galleon, and follow the million $ bread crumbs trail to SAC and then to Goldman Sachs and other Wall Street banks and brokerages, and then to the rating agencies and AIG, and then Countrywide and the mortgage industry and the appraisers, and then Freddie and Fannie and Citi and the big banksters, and then to the federal co-conspirators at U.S. Treasury, SEC, OTS, and the Federal Reserve, including Hank "the mole" Paulson, Ben "the bag man" Bernanke, Tim "the Wall Street patsy" Geithner, and then to the members of Congress who took money to facilitate the criminal enterprises. 

As the prosecutors and FBI dig deeper, eventually I hope to see coast-to-coast arrests, from Countrywide to Goldman Sachs and every one in between. I hope to see Racketeer Influenced and Corrupt Organizations Act (RICO) prosecutions and mass trials in style of the Maxiprocesso (Maxi Trial) of the Mafia in Sicily during the mid-1980s that resulted in hundreds of defendants convicted. I hope to see RICO confiscations of the hundreds of billions in illegal "profits" from the criminal enterprises of the mortgage industry and Wall Street Mafia.

Let us pray for the prosecutors to have the testicular fortitude to prosecute the greatest financial crimes in U.S. history.

[Fred C Dobbs]

As Jake Gittes said in the movie The Two Jakes.  

"Guys like (INSERT NAME) don't get arrested,
they get streets named after them."

Don't get your hopes up too high. 

[mgarrett84]

I have an interesting story.

[Anonymous]

Okay I got a real GEM for you guys, before I go out tonight. About 7 years ago a good friend of mine's father got us both security jobs while we were in high school. I worked at some little 5 story office building in Darien, my friend however worked in an office building right by a parking lot that was our afterschool/weekend hangout. The office building was of non-other than Steve Cohen's SAC Capital. My friend worked a lot of the weekends when the place was empty. So my friend invites his girlfriend to come over and see him at work. The next day my buddy calls me up and says "hey I had sex with my girlfriend at work the other night" I think to myself, nice your getting some at work. Then later on that day my buddy calls and says "hey I almost got fired" I ask, "for what?" "He says apparently the boss knew somehow that I was in Steve Cohen's office" I reply, "why were you in there?" He says "I was banging my girlfriend on the sofa in there". Thought you guys might enjoy that.

Also, They had great fresh cold cuts in there and a really nice gym.

[Anonymous]

WGAS...

[Anonymous]

Your story is not in the least bit interesting.

[heatbarrier]

Didn't Paulson said while Treasury Secretary that there were "bad" hedge funds (forgot to mention the criteria) and he would rather take those out rather than putting limits on the industry? It seems like sharks are taking out piranhas.

[Anonymous]

Just like the mob or drug gangs, more than a few years ago, SAC started sloughing off managers into their own vehicles and then seeding them with as much as 25%+ of the starting equity. Really easy to then say 'no idea what they were doing...they're a standalone, separate entity' but demanding top tier, say 2-3x market returns from said entities which can only be done by nefarious means. On another avenue rich with opportunity, tell the SEC to speak to 15,000 public companies CEOs/CFOs asking which HFMs strong arm them for non-public info. This could be a gold mine for the government if they do what is right for the country and the capital markets. And capital raising public companies should not fear a return to dealing with asset management firms which will hold their securities for more than a nano-second. Kowtowing to the HFM isn't worth it in the long run.

[SRV - ES339]

Thanks Tyler... but do you really believe they'll get to the "big fish?"

I don't for a minute... do you really think it's possible?

[Anonymous]

It's obvious and blatant. I've looked at his positions, 640 of them listed for 5 billion of his money, a fewmore than the s& p 500. Yet he attains 50% per year gross, with the equivalent of a fucking index fund that averages 11% over history in good years. His clients better hope he's only insider trading and not another Bernie or Stanford with those astronomical numbers.