Judge Jed Rakoff

Backdoor Disarmament? Feds Propose "Banning Sale Of Firearms To Medical Marijuana Card Holders"

"...have often wondered if/when the softening on the War on Drugs would be used as a weapon of disarmament. This is an interesting ploy by the feds to use the move towards decriminalizing marijuana as a means of barring Second Amendment lovers from purchasing guns – since it will be argued that marijuana introduces a dangerous or ‘irrational and unpredictable’ element. Of course, they don’t ban alcoholics or prescription pill poppers from purchasing weapons, but I’m sure that many people would be interested in doing so if they could."

In Duel With Valeant, Ackman; Is Judge David Carter The "New Jed Rakoff?"

In his rejection of an SEC settlement with Citigroup, Judge Jed Rakoff vowed to "see that the truth emerges." After presiding over the most high-profile insider trading cases since the crisis -- including Raj Rajaratnam and Rajit Gupta -- Judge Rakoff has come to symbolize the mantra that "nobody is above the law." In determining that Valeant and hedge fund manager Bill Ackman must face insider trading charges for their failed takeover of Allergan, U.S. District Judge David Carter may be the "new Rakoff."

Frontrunning: April 8

  • Shell Will Buy BG Group for $70 Billion in Cash and Shares (BBG)
  • IMF warns of long period of lower growth (FT)
  • Wall Street sanguine as it heads into worst earnings season in six years (Reuters)
  • Switzerland First With 10-Year Bond at Negative Yield (WSJ)
  • U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices (BBG)
  • Rahm Emanuel Re-Elected as Mayor of Fiscally Ravaged Chicago (BBG)
  • Oil falls on U.S. stock build, record Saudi output (Reuters)
  • White South Carolina policeman charged with murdering black man (Reuters)
  • German Factory Orders Drop for Second Month (BBG)
  • A third of Republicans support Iran nuclear deal (Reuters)

Frontrunning: August 6

  • So that's what Obama meant by "costs" - Italy Recession, German Orders Signal Euro-Area Struggle (BBG)
  • Russia worries, weak German data weigh on Europe (Reuters)
  • Hedge Funds Betting Against Banco Espírito Santo in Line for Big Gains (WSJ)
  • Bankers Called Up for Ukraine War as Rolls-Royce for Sale (BBG)
  • Double Punch for 'Inversion' Deals (WSJ)
  • Statist Strongmen Putin-Xi See History’s Capitalism Clash (BBG)
  • China bans beards, veils from Xinjiang city's buses (Reuters)
  • BATS to Settle High-Speed Trading Case (WSJ)
  • Second Ebola patient wheeled into Atlanta hospital for treatment (Reuters)

Vietnam Shows How To Clean Up The Banking System: Ex-Banker Faces Death Penalty For Fraud

The lack of prosecution of bankers responsible for the great financial collapse has been a hotly debated topic over the years, leading to the coinage of such terms as "Too Big To Prosecute", the termination of at least one corrupt DOJ official, the revelation that Eric Holder is the most useless Attorney General in history, and even members of the judicial bashing other members of the judicial such as in last night's essay by district judge Jed Rakoff. And naturally, the lack of incentives that punish cheating and fraud, is one of the main reasons why such fraud will not only continue but get bigger and bigger, until once again, the entire system crashes under the weight of all the corruption and all the Fed-driven malinvestment. But what can be done? In this case, Vietnam may have just shown America the way - use the death penalty on convicted embezzling bankers. Because if one wants to promptly stop an end to financial crime, there is nothing quite like the fear of death to halt it.

Frontrunning: April 4

  • Helicopter QE will never be reversed (Evans-Pritchard)
  • Bank of Japan Launches Easing Campaign under new leadership (WSJ)
  • Draghi Considers Plan B as Sentiment Dims After Cyprus Fumble (BBG)
  • Spain threatened by resurgent credit crunch (FT)
  • U.S. Dials Back on Korean Show of Force (WSJ)
  • Gillard Urges Aussie Firms to Emulate German Deutschmark Success (BBG)
  • Bank watchdog warns on retail branches (FT)
  • Xi's Russia visit confirms continuity of ties (China Daily)
  • Portuguese Government Survives No-Confidence Vote (WSJ)
  • Mortgage rates set for fall, Bank of England survey shows (Telegraph)
  • Russia’s bank chief warns on economy (FT)
  • Fed member hints at summer slowing of QE3 (FT)

Frontrunning: March 16

  • Tapping oil from the SPR may be trickier than ever (Reuters)
  • Why Quantitative Easing Is The Only Game in Town: Martin Wolf (FT)
  • Lacker Says Fed May Need to Raise Target Interest Rate in 2013 (Bloomberg)
  • Japan Debt-Financing Concern Clouds BOJ’s Bond Buying (Bloomberg) No worries - US will just buy Japan's bonds
  • IMF Approves €28bn Loan to Greece (FT)
  • Banks Want Fed to Iron Out 'Maiden' (WSJ)
  • China 'Wealth Exodus' Underestimated (China Daily)
  • Geithner Calls For Reforms to Boost Growth (FT)
  • China Adds Treasuries For First Time Since July on Europe Woes (Bloomberg)
  • Osborne Weighs 50p Tax Rate Cut To 45p (FT)

Judge Rakoff Humiliates Mary Schapiro By Nullifying Citi MBS Settlement, Calls It "Neither Fair, Nor Reasonable, Nor In Public Interest"

Once again Judge Jed Rakoff, also known as the only person in the Southern District of New York who calls out the SEC consistently and routinely on their corruption, has ruined the day for both Mary Schapiro and for Vic Pandit, by making the proposed $285 million MBS fraud settlement wrist slap null and void, and setting a trial date for July 16, 2012 in which Citigroup will actually face a jury and defend itself to peers instead of to future Citi employees in the form of SEC porn addicts. It is unclear if the reversal is a bigger slap in the face for Citi or for the SEC, but one thing is certain: both parties are to be massively embarassed as a result of this ruling which essentially says that both entities are culpable - the first of committing a far greater crime than the $285 mm fine deems fit, and the second of being a complicit enabler of precisely this kind of criminal behavior which it then fines with some token amount and things can continue as they were. And just like in the case of SEC vs BofA, Rakoff crucifies the SEC's worthless organizationL: "the Court concludes, regretfully, that the proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest." He continues: "Most fundamentally, this is because it does not provide the Court with a sufficient evidentiary basis to know whether the requested relief is justified under any of these standards. Purely private parties can settle a case without ever agreeing on the facts, for all that is required is that a plaintiff dismiss his complaint. But when a public agency asks a court to become its partner in enforcement by imposing wide-ranging injunctive remedies on a defendant, enforced by the formidable judicial power of contempt, the court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance." It really, really is time for Schapiro to resign after this gross public smackdown by a member of the court who has just chided her for not doing precisely what she is paid millions to do. That said we can only hope that Rakoff does not drop the ball like he did last time around when he was about to sue Ken Lewis yet pulled out in the last minute. Realistically, what happens is SEC will fine Citi with a much greater fine, probably $500MM or so, and Rakoff will end up approving the settlement, because as the status quo slowly implodes, nothing really changes until everything finally crashes.

SAC Up 9.2% YTD, Paulson Heart Boehner, And Other Hedge Fund Observations

For those who live and breathe solely to know how Stevie Cohen has performed at any given moment, we have an update. According to Bloomberg's Hedge Funds brief, SAC Capital told investors last week that his main hedge fund is up 9.2% year to date. It is unclear if he provided any further insight into the firm's troubled relationship with various regulators and law enforcement officials. Some other fund update from Bloomberg. Balestra Capital Partners LP was negative 2.37 percent last month and has lost 7.63 percent year-to-date, according to its monthly results and commentary sent to investors. Brencourt Advisors LLC’s $260 million Brencourt Multi-Strategy Fund lost 90 basis points to drop year-to-date returns to 2.84 percent, according to an email update sent to investors. The merger arbitrage fund gained 22 basis points last month and has returned 2.17 percent through June 30. The Brencourt Credit Opportunities Fund lost 0.95 percent and has returned 3.39 percent in 2011. Broadfin Capital LLC’s Broadfin Healthcare Fund LP returned nearly 9 percent in the second quarter, according to its quarterly letter to investors, a copy of which was obtained by Bloomberg. Long positions in Alkermes Inc. and Hi-Tech Pharmacal Co. Inc. “were the largest drivers of the fund’s performance,” the letter said. The New York-based fund is managed by Kevin Kotler. Summarizing returns by strategy for 2010 and 2011 (table below) shows quite vividly that what worked back in 2010 is no longer in vogue, although the main exception - the best strategy for both years - continues to be Mortgage-Backed arbitrage. Although most curious for some may be that none other than John Paulson is now officially the biggest fan of John Boehner. Read on.

Former SAC PM Pleads Guilty To Insider Trading

Former SAC portfolio manager Donald Longueuil has just pled guilty to charges of insider trading (before the (in)famous Judge Jed Rakoff) in Federal District Court in Manhattan. Dealbook reports: "Mr. Longueuil described in court how after reading news reports about the government’s insider trading last fall he destroyed his hard drive that contained incriminating evidence. The government, however, dropped its obstruction of justice charge against Mr. Longueuil. Under the plea agreement with the government, Mr. Longueuil faces a prison sentence between 46 months to 57 months. Judge Rakoff could depart from those guidelines." And he certainly will if Longueuil, who is a cooperating witness, drops some juicy bombs about every DA's public enemoy number one: ole Crown Lane, Greenwich residing blue eyes himself.

Why The SEC Is Irreperably Conflicted On The Issue Of High Frequency Trading

Dear Senator Kaufman, we at Zero Hedge applaud your effort to bring transparency to, and evaluate the various new forces that, for better or worse, determine the modern market landscape. However, we would like to bring to your attention a fact which renders your entire approach of seeking fair and unbiased commentary from the SEC irrevocably moot. The reason is that the SEC, in alignment with many of the very industry players who may be abusing market structure for their own tiered benefit, stands to benefit significantly from an increased amount of daytrading volume across all markets, and, in fact, based on actions as recent as 4 months ago by the SEC, the regulator is well aware of the monetary benefits that ever-increasing churn creates for the commission and is fully intent on capitalizing on them. We thus suggest you bypass any protocol that has an SEC intermediation and go directly to penning a Bill which, we trust, will prove to be more fair and objective than anything the SEC would ever provide you with. The reason for the SEC's insurmountable conflict of interest is the so-called Section 31.