"Matchmaker, matchmaker, make me a match," goes the old song. "Find me a find, catch me a catch."
But watch out for the U.S. Securities and Exchange Commission.
The SEC and the U.S. Attorney's Office for the Southern District of New York today charged a New York-based hedge fund and four hedge fund portfolio managers and analysts in a $30 million insider trading scheme. They are the latest defendants in an ongoing investigation involving insider trading.
The fund managers allegedly received illegal tips from so-called expert networking firm Primary Global Research, which is in the “matchmaking” business — “Matching people who had information with people who wanted it,” SEC Enforcement Division head Robert Khuzami said during a press conference today. “Today we pull back the curtain and reveal that the only matching that was going on here was to match theft with greed.”
The defendants allegedly used nonpublic information involving companies such as Advance Micro Devices, Seagate Technology, Western Digital, Fairchild Semiconductor and Marvell to make trades, netting more than $30 million.
Last week, the SEC charged six consultants who moolighted for Primary Global Research without the knowledge of their employers. The consultants allegedly shared confidential information and, in return, were paid hundreds of thousands of dollars in purported consulting fees.
At today’s press conference, Khuzami said the crackdown is “not a condemnation of all expert networking firms or the consultants who are associated with them who provide legitimate expertise and experience to assist investors in making investment decisions.”
He continued, “But that is not what occurred in the events that underlie today’s charges. Today’s charges reveal thoroughly corrupt conduct, through and through.”
Former SAC Capital Advisors junior portfolio managers Noah Freeman and Donald Longueuil were charged with insider trading while working at the $12 billion fund. Freeman, represented by Benjamin Rosenberg of Dechert, pled guilty to two criminal counts of securities fraud yesterday as part of a cooperation agreement with prosecutors..
In a statement, SAC said it was “outraged” by the alleged “egregious violations of our ethical standards,” and said it was “continuing to cooperate with the government’s investigation.”
Also charged: Samir Barai, the founder and portfolio manager of Barai Capital Management, and Jason Pflaum, a former technology analyst, who also pled guilty to two counts of securities fraud. Pflaum is represented by Michael Grudberg of Stillman, Friedman & Shechtman.