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The Latest In Insider-Trading Gate: Two Former SAC Traders Charged

Tyler Durden's picture





 

The latest development in the insider trading gate, whose sole target is and has always been SAC, appears to be closing in on the target. According to a press release to be held shortly, two former SAC employees are about to become cooperating witnesses for the government. The ex-SACites are Noah Freeman and Donald Longueuil, which according to Bloomberg worked at the fund between 2008 and 2010. The full conference by US Attorney Preet Bharara is due any moment. This is likely just an intermediate phase before the big names start being accused as bigger cases are built against those at the very top.

From Bloomberg:

Noah Freeman and Donald Longueuil, former employees of SAC Capital Advisors LP according to a person familiar with the matter, were charged as part of a nationwide investigation of insider trading at hedge funds, technology companies and so-called expert networking firms.

Longueuil worked at SAC Capital-unit CR Intrinsic from July 2008 to July 2010 and Freeman worked at SAC Capital from June 2008 to January 2010, according to the person, who declined to be identified because the matter isn’t public. Charges against three hedge fund managers and an analyst were announced today by U.S. Attorney Preet Bharara in Manhattan. Counts against two of them are to include obstruction of justice, Bharara said.

Samir Barai was also charged by federal prosecutors in New York, according to court documents. Freeman and Jason Pflaum reached a plea agreement with prosecutors, according to the filings. Winifred Jiau, already charged as part of the probe, communicated with Barai and Freeman, according to court papers.

Barai, founder of Barai Capital Management, is co- conspirator 1, or “CC1,” in the complaint filed in December against Jiau, an ex-consultant for expert-networking firm Primary Global LLC, according to a person familiar with that case.

A profile of all 4 charged hedge funders is below courtesy of the WSJ:

Samir Barai, of Barai Capital Management

Barai in 2008 ordered up purchased of stock in tech companies —
including Marvell Technology and Fairchild Semiconductor — after being
on the receiving end of their corporate secrets, according to the
government charges unsealed today.

Barai in November also told one of his colleagues to destroy
“documentary and digital records after reading articles about a federal
grand jury investigation into insider trading,” according to the
government complaint today.

The Wall Street Journal reported last month
that Barai was an unnamed co-conspirator in a December criminal
complaint. Prosecutors said a hedge fund, which the Journal has
identified as Barai Capital, received more than $820,000 in May and June
2008 from trading ahead of Marvell’s earnings.

Barai until 2007 ran a tech-stock portfolio at Citigroup’s internal
hedge-fund division, and then he left to found his own investment firm.
FBI agents raided his hedge fund in November, the Journal reported last
month. Samir Barai and other employees of Barai Capital either didn’t
respond to requests for comment or declined to comment for last month’s
stories in the Journal.

Donald Longeuil

Longeuil, 35 years old, left CR Intrinsic Investors LLC, a division
of SAC Capital, about a year ago, the Journal is reporting. The
government complaint today says Longeuil destroyed a computer flash
drive and external hard drives in November, after reading about an
investigation into insider trading.

Jason Pfaum

A technology analyst at Barai Capital Management, Pfaum pleaded
guilty on charges of conspiracy and securities fraud and has been
cooperating with prosecutors in their insider trading investigation,
according to the legal filings today. In 2008, according to the
government, Pfaum talked with an employee at Fairchild Semiconductor to
glean secrets about the company. Barai then a day later ordered the
purchase of about 95,000 Fairchild shares, according to the legal
complaint.

Noah Freeman

Freeman worked at hedge fund SAC Capital’s Boston office from 2008
until January 2010, the Journal is reporting. Freeman, whom the
government describes as a specialist in the tech and semiconductor
industries, “maintained a network of sources who provided Freeman with
Inside Information regarding public companies,” including Marvell,
Nvidia, Fairchild and Actel, according to the legal filings released
today.

Full complaint against Barai and Longueuil:

 

 


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Tue, 02/08/2011 - 13:22 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Coming soon to Bravo and/or A&E:

 

"Flip that Lackey."

I wonder if the porn-surfing SEC will file Amicus Briefs in defense of the accused.

If fall guys fall in the forest, but truly culpable aren't anywhere around, does it make a sound?

Tue, 02/08/2011 - 13:25 | Link to Comment LowProfile
LowProfile's picture

+1

Wed, 02/09/2011 - 01:15 | Link to Comment StychoKiller
StychoKiller's picture

Bravo!  The Kabuki Theater sure puts on a helluva drama (or is it some sort of comedy?)...

Tue, 02/08/2011 - 13:11 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

The full conference by US Attorney Preet Bharara is due any moment.

Forgive me, but my brain read this as Tweet Piranha.

Tue, 02/08/2011 - 13:16 | Link to Comment buzzsaw99
buzzsaw99's picture

Too bad (for them) that they didn't work for the squid holding company.

Tue, 02/08/2011 - 13:21 | Link to Comment Mr. Poon
Mr. Poon's picture

Or Mark Cuban.  The key is to ensure that you are not trading on behalf of either yourself or a hedge fund, but rather a large investment bank or a multi-billionaire who has enough press access to make the case that you are being picked on by mean, jealous regulators just because you are successful and rich.

Tue, 02/08/2011 - 13:30 | Link to Comment buzzsaw99
buzzsaw99's picture

or, as in the case of the squid, you just own everyone.

Tue, 02/08/2011 - 13:17 | Link to Comment HelluvaEngineer
HelluvaEngineer's picture

Wow, was that written on a typewriter?  Now I know where my tax money goes.

Tue, 02/08/2011 - 13:28 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Nope. Just boiler plate legal pleading software from the good old days made to mimic the typewriter font.

This will soon change because the new and improved version of the "Banzai7 Labs Visual Combat Legal Software version 6.66" hasn't been widely accepted in the states......yet. My understanding is that it's big in Hong Kong and soon to hit the Chinese mainland.

Once WB7 devolves the software to work on the Department of Justice DOS 6.1 porn platform it will take America by storm.

Tue, 02/08/2011 - 13:37 | Link to Comment TruthInSunshine
TruthInSunshine's picture

None of this is produced on typewriters.

The symbols and indentation you see in the case caption is a carryover in the finest legal tradition of making things as complicated as possible, just as is the continuing use of Latin in pleadings and open proceedings.

 

 

 

Tue, 02/08/2011 - 14:05 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

None of this is produced on typewriters.

Um-mm, I thought I said that. This was why I used the word "software".

Nope. Just boiler plate legal pleading software from the good old days made to mimic the typewriter font.

Tue, 02/08/2011 - 13:16 | Link to Comment glenlloyd
glenlloyd's picture

Yes, they were talking about that on Bloomberg radio this am

Tue, 02/08/2011 - 13:23 | Link to Comment Rainman
Rainman's picture

These snails leave a digital trail that any snoop dog copper could follow with sufficient vigilance. These perps today are lazy and unaware. In the oil and railroad days, a wink and nod were sufficient.

Tue, 02/08/2011 - 13:32 | Link to Comment Zero Govt
Zero Govt's picture

If you work at a fish market and some Tuna falls off the truck and you take it home, you've benefitted from 'insider trading'. Or you buy 6 kilos of Kiwi fruit because you're a staffer at a supermarket and know the price is about to rise 7% on the next delivery you're "insider trading".

The SEC are a bunch of laughable toe rags chasing a few small fry when the entire banking industry are mass and multiple fraudsters with mortgages. Who investigates the bloody bent SEC??? 

Tue, 02/08/2011 - 13:32 | Link to Comment buzzsaw99
buzzsaw99's picture

the sec was too busy looking for their lost porn to work on this one.

Tue, 02/08/2011 - 14:42 | Link to Comment Zero Govt
Zero Govt's picture

i'll bet the SEC get 'insider porn' too

Wed, 02/09/2011 - 01:18 | Link to Comment StychoKiller
StychoKiller's picture

ALLLL the way inside!  Use a speculum, you'll want to get every drop...

Tue, 02/08/2011 - 14:01 | Link to Comment Mr. Poon
Mr. Poon's picture

So, the SEC actually does its job and finds serious insider trading, and this is the response?

With all due respect to my good friend Niccolo Macchiavelli, I will say:  it is good to be hated.  As a regulator, if nobody hates you then you are probably not doing your job.

(P.S. And it is the OIG that investigates the SEC, which you could have figured out with fifteen seconds and a Google search.)

Tue, 02/08/2011 - 14:08 | Link to Comment Zero Govt
Zero Govt's picture

Ahh didn't know about the OIG, they've been so QUIET I never heard of them.... I'd have heard of them if they'd PROSECUTED the SEC for ignoring systemic Wall Street mortgage fraud or PROSECUTED the SEC and half a dozen other US Regulators for MISSING the Madoff scandal despite being given patent evidence of wrong-doing or sitting asleep on the job when the ENTIRE WS Banking cartel went bankrupt.

The US Regulators No.1 Job was to stop a run on the banks... they FAILED 100% so where is the fuking OIG ????

 

Wed, 02/09/2011 - 01:20 | Link to Comment StychoKiller
StychoKiller's picture

As a regulator, if nobody hates you then you are probably not doing your job.

Unfortunately, the people that're throwin' all the hate are NOT the perps, just the victims!

Tue, 02/08/2011 - 13:28 | Link to Comment Gubbmint Cheese
Gubbmint Cheese's picture

forgive me but could someone remind me why is SAC/ex-Sacites is/are scapegoat again?

Tue, 02/08/2011 - 13:37 | Link to Comment Zero Govt
Zero Govt's picture

...behind every Regulator are a bunch of monopolists pulling the puppet strings to mop up the competition and screw the free market

Tue, 02/08/2011 - 20:36 | Link to Comment Problem Is
Problem Is's picture

Yup. The only criminals allowed are the TBTF criminals who will have their lackeys at DOJ and FBI hot on the trail of any non TBTF fraudsters...

Tue, 02/08/2011 - 13:33 | Link to Comment TruthInSunshine
TruthInSunshine's picture

See everyone?

You, too, have a fair shot, and can't be gamed, as BSDs befriend employees inside companies in order to get the advanced truth on what their order books look like, profits look like, etc., months before any silly conference calls.

"Pfaum talked with an employee at Fairchild Semiconductor to glean secrets about the company. Barai then a day later ordered the purchase of about 95,000 Fairchild shares, according to the legal complaint.

...

Freeman worked at hedge fund SAC Capital’s Boston office from 2008 until January 2010, the Journal is reporting. Freeman, whom the government describes as a specialist in the tech and semiconductor industries, “maintained a network of sources who provided Freeman with Inside Information regarding public companies,” including Marvell, Nvidia, Fairchild and Actel, according to the legal filings released today."

But I am confident that these are isolated cases, that the massive money to be made on both ends of these 'leaks' are confined to a handful of bad actors (that the SEC is actively purging), and that you can all rely on the integrity of the system, and also have strong faith that no one can game this fair system of making rational investments based on rational analysis and dutiful and time-consuming research.

I'm as "confident" that this is the exception, and not the rule, as Bernanke is "confident" in his ability to tamp down (non-existent, according to him) inflation, in 15 minutes.

 

/sarc

 

Tue, 02/08/2011 - 13:44 | Link to Comment Zero Govt
Zero Govt's picture

are these nano-second trading computers that get micro second advance of buy/sell orders not insider trading defined in a nutshell?

Is the Fed not the biggest single provider of insider information to the Big Bad Banks on their next spending orgy?

Tue, 02/08/2011 - 13:47 | Link to Comment Don Birnam
Don Birnam's picture

Calls to mind the script to "Boiler Room."

Here come the g-men...there goes Vin Diesel down the back stairs...

Tue, 02/08/2011 - 13:47 | Link to Comment bugs_
bugs_'s picture

Hey Steve - time to head for Dubai?

Tue, 02/08/2011 - 13:49 | Link to Comment buzzsaw99
buzzsaw99's picture

The FBI, DOJ, the entire fedgub work for teh squid.

Tue, 02/08/2011 - 13:55 | Link to Comment haskelslocal
haskelslocal's picture

The sacrificial lambs. Take down a few, distract, ignore the rest. Funny... Is that the stock market I see drifting upwards for no reason on a day of bad market news?

Tue, 02/08/2011 - 13:57 | Link to Comment digalert
digalert's picture

Freeman and Longueuil ?

How about some big names...oh I don't know...

Blankfein, Dimon?


Tue, 02/08/2011 - 14:08 | Link to Comment SilverFiend
SilverFiend's picture

I am a novice when it comes to the markets.  But 

don't the big boys like JPM, Citi and BAC do this

all the time and worse?

Tue, 02/08/2011 - 14:14 | Link to Comment buzzsaw99
buzzsaw99's picture

Everyone back in the market, the sheriff has cleaned up dodge.

Tue, 02/08/2011 - 14:22 | Link to Comment OMG
OMG's picture

WTF Did they find the keys to BB chopper. This is like busting the kid smoking a dobie and claiming you have won the war on drugs.

 

Tue, 02/08/2011 - 14:32 | Link to Comment Dang
Dang's picture

The joke is on all of us, again! SAC will hang these poor innocents to protect the massive game of insider trading they have enjoyed since inception. First SEC is Self Regulating Org, what a fucking joke. Second, think of who is who in SAC's investor base! Another travesty brought to us by the dark forces....

Tue, 02/08/2011 - 15:56 | Link to Comment Handle with care
Handle with care's picture

"This is likely just an intermediate phase before the big names start being accused as bigger cases are built against those at the very top."

 

Its so sweet you still believe this.

 

Tue, 02/08/2011 - 20:34 | Link to Comment optimator
optimator's picture

How did Plaum get in this?

http://cryptome.org/0003/screw-yourself.htm

Tue, 02/08/2011 - 23:25 | Link to Comment Buck Johnson
Buck Johnson's picture

I have a very strange feeling that their are some big names and companies that are about to be outed.

Wed, 02/09/2011 - 01:23 | Link to Comment StychoKiller
StychoKiller's picture

Maybe, But will THEY BE PROSECUTED??

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