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"At SAC It Was Understood You Provided Steve Cohen With Inside Information"

Tyler Durden's picture





 

Slowly, the fund that made "information arbitrage" a household name, and almost singlehandedly created the expert network industry (first exposed on Zero Hedge in 2009 before the broader public had ever heard of them up on Part 1, Part 2 and Part 3 and all of which was summarized in Are Expert Networks About To Be Exposed As The Ringleader In The Biggest Insider Trading Bust In History?) only to watch it go up in insider trading flames (as we warned years prior), and which no regulator had dared to touch for decades, is coming unwound. The latest details in a story which once again began on the pages of Zero Hedge in 2010 come from Bloomberg, where we learn what everyone already knew, namely that when working for Stevie Cohen "it was “understood” that those assigned to give their best trading ideas to founder Steven A. Cohen would provide him with insider information." Because one doesn't generate 10-20% 'Alpha' (a term which no longer has any meaning in a market exposed to have been driven exclusively by insider trading in the pre-New Normal, and entirely by central planning in the post-New Normal era) year after year and charge 3 and 50 for being just smarter. Being first apparently counts too, but cheating beats all.

From Bloomberg:

The former fund manager, Noah Freeman, pleaded guilty to securities fraud in February 2011 after speaking to Federal Bureau of Investigation agents and federal prosecutors in New York in late 2010, in a so-called proffer session. Defendants use such sessions to determine whether to cooperate with the government against others.

 

“At SAC Capital you were expected to provide your trading ideas to Cohen,” Freeman said, according to a Dec. 16, 2010, memo written by FBI Special Agent B.J. Kang. “Freeman and others at SAC Capital understood that providing Cohen with your best trading ideas involved providing Cohen with inside information.”

 

Freeman, one of five current or former SAC portfolio managers or analysts implicated in insider trading, isn’t quoted as saying Cohen, 56, knew the information came from illegally obtained tips, ordered him to provide them or traded on the data. Neither Cohen nor Stamford, Connecticut-based SAC Capital, which manages $14 billion in assets, has been accused of criminal or civil wrongdoing.

 

Freeman, 36, a 1999 Harvard College graduate who said he once managed a $300 million portfolio of technology stocks at SAC, spoke at length with the FBI about insider trading, according to excerpts of his interviews, which were filed in federal court in New York by Winifred Jiau. Jiau, a former consultant with Primary Global Research LLC, was convicted last year of insider trading and is challenging her conviction.

 

At one point in his career at SAC, Freeman, who worked in the firm’s Boston office, said he sat next to Cohen.

 

“Freeman pitched to Cohen many trading ideas over the 18 months he was at SAC and some of the trading ideas involved dirty information,” according to the memo by Kang, who was a New York-based agent at the time. Kang in 2009 arrested Galleon Group LLC co-founder Raj Rajaratnam on insider-trading charges.

 

When Freeman testified as a prosecution witness last year at Jiau’s trial, he told jurors he’d recorded telephone conversations and also wore a body wire for the FBI when he spoke and met with Longueuil, who’d been his co-conspirator and best man at his wedding.

 

Freeman told jurors he’d committed insider trading while working both at SAC and at his prior firm, Sonar Capital Management LLC , on at least 18 occasions and informed upon “more than a dozen” people.

 

“While there’s no way to know if Mr. Cohen is or isn’t a target, the bottom line is this is obviously an ongoing investigation,” Sabino, the law professor said. “Everyone is at risk, not just someone like Cohen or people who worked at SAC, but anyone who’s dipped their toe into the pool of insider trading better watch out as more people plead guilty and agree to cooperate.”

Now everyone shocked, shocked by this information, please raise your hands (but not too high or else the wiretap running along the inside sleeve will become visible)

 


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Tue, 10/02/2012 - 08:49 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

 

Clearly you have me confused with Martha Stewart.

 

Tue, 10/02/2012 - 08:59 | Link to Comment negative rates
negative rates's picture

Never mind raising your arms, I always check bras for wires, its called naked shorts and it keeps the DA at bay. 

Tue, 10/02/2012 - 12:52 | Link to Comment Carl Spackler
Carl Spackler's picture

GetZeeGold...You are on form, today.

Well done !

Tue, 10/02/2012 - 08:50 | Link to Comment HelluvaEngineer
HelluvaEngineer's picture

Law degree or no, his qualifications for Attorney General are impressive.

Tue, 10/02/2012 - 08:50 | Link to Comment cossack55
cossack55's picture

The next Fed Chairman

Tue, 10/02/2012 - 08:52 | Link to Comment HedgeAccordingly
HedgeAccordingly's picture

Shocked i tell you SHOCKED!!! - i wanna be a trader. wait nope - http://hedge.ly/QUyBcn

Tue, 10/02/2012 - 08:53 | Link to Comment Apocalicious
Apocalicious's picture

They have wanted Stevie bad, for a loooong time. Don't know if we'll see a perp walk ever, though because he's never been recorded, never used email, etc. He made them make the verbal pitch to him in person for his upsize book. Open secret, ZH, long before 2009...

Tue, 10/02/2012 - 09:49 | Link to Comment disabledvet
disabledvet's picture

Besides the vast improvements in insider trading tech make this irrelevant anyways. The problem is of course as the Federal Government created the Internet by definition they awarded themselves "First Look." there is nothing that Stevie and the boys saw that wasn't already being seen...and understood as such...by someone else. What was, is and continues to be done with that information on the other hand...

Tue, 10/02/2012 - 10:58 | Link to Comment TheGardener
TheGardener's picture

disabledvet, you might be overestimating .gov and it`s
data mining ventures because keeping the intelligence bureaucracy expanded and busy does not imply any of
those thugs consider themselves paid well enough to use
what they have for a brain.

Ever met a really clever person working for .gov ?

Even for the most demanding overseas spy position a certain
level of mediocrity is a requirement.

Tue, 10/02/2012 - 08:53 | Link to Comment Ralph Spoilsport
Ralph Spoilsport's picture

Can't wait to watch these clowns collapse quicker than a cheap suitcase under questioning.

Tue, 10/02/2012 - 08:53 | Link to Comment fonzannoon
fonzannoon's picture

pre market metals knock down.  Annoying.

Tue, 10/02/2012 - 08:55 | Link to Comment NewWorldOrange
NewWorldOrange's picture

It doesn't matter how the casino is set up. People are going to trade on insider information, period. The real scam is in pretending it's otherwise, and it lulls the sheep into a false sense of security. It can't be regulated or the laws effectively enforced. Legalize it and let anyone who decides to tread in these waters understand it's a part of the game.

Tue, 10/02/2012 - 11:09 | Link to Comment halodoc
halodoc's picture

Liar's Poker...

Tue, 10/02/2012 - 11:19 | Link to Comment Urban Redneck
Urban Redneck's picture

It's not even like an accusation has to be true.  If a motivated DA calls in the average banker and says squeal like pig, they'll say whatever the DA wants, if he pushes hard enough.  If the State wants you, they can trump up whatever charges they please, and misconstrue evidence to support those charges.  The problem is that the corrupted enforcement arm of the State won't even consider indicting the crime bosses.

Tue, 10/02/2012 - 08:55 | Link to Comment BrigstockBoy
BrigstockBoy's picture

If you're not cheating then you're just cheating yourself...
/sarc off

Tue, 10/02/2012 - 08:55 | Link to Comment JPM Hater001
JPM Hater001's picture

There once was a man from Nantucket

Who thought he should cheat and said fuck it

Turns out he was wrong

He threw all in the throng

And a whistle blower has another million dollar bucket.

Tue, 10/02/2012 - 08:56 | Link to Comment fonzannoon
fonzannoon's picture

Sorry to keep going OT but has ZH put up anything about this? It looks like Gary Johnson may actually get the debate held up tomorrow..

Lawsuits are common in politics, but there was one filed recently that is not common at all: someone has brought an antitrust suit, alleging that the major political parties have monopolized politics, and it is not exactly some crackpot who did it. The plaintiff is Gary Johnson, who is the Libertarian Party's nominee to be President, and who was not long ago the Governor of New Mexico. Governor Johnson's campaign filed suit on Friday in a California federal court, alleging that the Democrats, the Republicans, and the Commission on Presidential Debates have conspired to exclude other candidates in violation of the Sherman Antitrust Act. Governor Johnson seeks to enjoin the Presidential debates until other candidates are permitted to participate, so as to "restore competition and a level and honest playing field amongst those persons seeking the presidency . . . ."

Tue, 10/02/2012 - 11:18 | Link to Comment TheGardener
TheGardener's picture

"Antitrust" sounds a bit rusty in an international mercantile, domestic corporate fascist system praising itself globalist.

Tue, 10/02/2012 - 09:08 | Link to Comment GMadScientist
GMadScientist's picture

Ya know what these paper-pushers need?

More pistol-whippings when they drop the ball and step over the lines.

They're not too bright, so we'll go through several teeth and jawbones before it finally sets in, but it'll be worth the exertion.

Tue, 10/02/2012 - 09:12 | Link to Comment knukles
knukles's picture

LOL

They'll get him for ripping the tags off of the bottom of office chairs. 

Tue, 10/02/2012 - 09:16 | Link to Comment Sudden Debt
Sudden Debt's picture

People are just jalous

Tue, 10/02/2012 - 09:19 | Link to Comment cossack55
cossack55's picture

Perhaps you meant "jailous"?

Tue, 10/02/2012 - 09:21 | Link to Comment Blazed
Blazed's picture

Poor little Mr. Cohen, and Mr. Noah Freeman let us all weep and worry for them both because this is all so SHOCKING!

https://en.wikipedia.org/wiki/Steven_A._Cohen

Tue, 10/02/2012 - 09:53 | Link to Comment Squid Vicious
Squid Vicious's picture

scum of the earth...

Tue, 10/02/2012 - 09:21 | Link to Comment cnhedge2
cnhedge2's picture

A Closer Look at Business Surveys (1): Getting Real

http://www.cnhedge.com/thread-9710-1-1.html

Tue, 10/02/2012 - 10:05 | Link to Comment Darth Sidious
Darth Sidious's picture

In the early 2000's there were stories circulating on the street that a certain big name CT hedg fund manager had caught a certain other big name CT hedge fund manager with a mole on the technology trading desk of his fund . . . supposedly, if true, one of the big guys new exactly what the other big guy was trading during the tech craze.

i emphasize that these were only stories . . . very well might not have been true

 

 

Tue, 10/02/2012 - 10:25 | Link to Comment JimBowie1958
JimBowie1958's picture

The real damage here is the damage caused to the reputation of the markets. As this sort of thing becomes more of a dog-bites-man story line than man-bites-dog, real people are leaving the markets and only the HFT's are doing the majority of the trading. Soon that will end also, and the  markets will have seriously low volume and they willhave to reform in more meaningful ways.

At least that is the theory, but all too often Nature vetoes the opportunity to reform in various ways.

I have a feeling Nature is about to bite us in the ass again when the oil magnates stop demanding USD for their petrol and the USD falls from favor.

Tue, 10/02/2012 - 10:33 | Link to Comment squexx
squexx's picture

And you expect WHAT from his evil tribe?!?

Tue, 10/02/2012 - 11:20 | Link to Comment czarangelus
czarangelus's picture

If only information arbitage was a household term...

Tue, 10/02/2012 - 13:35 | Link to Comment bugs_
bugs_'s picture

freeman had to spill the beans on stevie (and maybe stretch it a little too) in order to be a freeman

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