By Nathaniel Popper, Los Angeles Times –
NEW YORK — A major investigation of insider trading on Wall Street extended beyond the exclusive world of New York hedge funds when federal agents arrested four people Wednesday.
Danny Kuo, who worked at Whittier Trust Co. in South Pasadena, Calif., and Todd Newman, a portfolio manager at the Boston hedge fund Diamondback Capital Management, were among those arrested Wednesday. The others were Anthony Chaisson, the co-founder of the New York hedge fund Level Global Investors; and Jon Horvath, a research analyst at Sigma Capital.
The men were part of what prosecutors called a “circle of friends who essentially formed a criminal club” and who allegedly made a profit from trading on inside information about the technology companies Dell and Nvidia.
The four men, along with three others who cooperated with the government, made $62 million in illicit profits and avoided losses, according to the criminal complaint.
The arrests are the latest push in a sprawling insider trading investigation that has already resulted in 56 convictions in the past four years, including that of hedge fund manager Raj Rajaratnam. Last year, Rajaratnam received the longest ever-sentence for insider trading.
“Each wave of charges seem to produce leads that lead us to the next wave,” Janice Fedarcyk, the assistant director of the FBI’s New York office, said in a news conference Wednesday.
All of the men are accused of trading on early tips about Dell’s financial results that were distributed by an employee at Dell. Kuo is accused of getting early tips about Nvidia’s results and passing them along to the other traders.
“The charges unveiled paint a stunning portrait of organized corruption on a grand scale,” Preet Bharara, the U.S. attorney in Manhattan, said in the news conference.
The companies and lawyers for the men could not immediately be reached for comment.