The feds unsealed a scathing indictment this morning against two hedge fund managers as part of a larger sweep looking into insider trading, as two other men in the case pleaded guilty to the charges, authorities said.
The charges against two of the portfolio managers, Samir Barai, 39, and Donald Longueuil, 34, include conspiracy to commit securities and wire fraud and obstruction of justice, the US Attorney's office in Manhattan said.
Barai founded Barai Capital Management in 2008 after leaving Citigroup's hedge-fund unit.
Manhattan US Attorney Preet Bharara called the charges "a sad chronicle not only of criminal conduct, but also its brazen cover-up."
"It alleges hard core insider trading in stock after stock -- people blatantly trafficking in material, non-public information," he added. "And the lengths to which two of these defendants went to cover their tracks sounds like something out of a bad movie."
Last month, Barai was an unidentified co-conspirator mentioned in a December insider trading complaint against Winifred Jiau, a Primary Global Research consultant who allegedly provided information on Marvell Technology Group Ltd. and Nvidia Corp.
The feds also said they reached a plea deal with two other managers involved in the case, Noah Freeman, 35, and Jason Pflaum, 37, who both worked as hedge fund research analysts, according to court papers.
The feds said that between 2006 and last year, the four men participated in a conspiracy to obtain inside information -- including detailed financial earnings -- about numerous public companies, including Marvell Technology Group, according to the complaint.
The men obtained the information both from employees who worked at these and other public companies and from independent consultants who communicated with employees at public companies.
The feds said that on May 23 and May 28, 2008, Jiau -- who was later busted on December 29, 2010 -- had phone conversations with Barai and Freeman during which she advised them of Marvell’s quarterly revenues, gross margins and earnings per share.
The information Jiau provided was accurate and preceded Marvell’s public announcement of its financial results for the quarter.
The feds said Freeman then provided the tip to Longueuil. As a result of the information, the hedge fund where Barai worked purchased over 300,000 shares of Marvell and the hedge fund where Longueuil worked gobbled up 800,500 shares of Marvell.
After Marvell’s public announcement, the price of its stock increased approximately 23 percent -- resulting in net profits of over $820,000 for Barai's hedge fund and $1.08 million to Longueuil.
Barai and Longueuil are also accused of destroying documents, deleting emails and files from a laptop computer to cover up the alleged misdeeds.
In text messages to Pflaum, Barai wrote, "So what if we talked to anyone. ... They need proof that we acted on something," according to the feds.
Barai did not know last November that Pflaum was cooperating with the feds.
"There isn’t anything though. ... Nothing material," Barai wrote, according to the feds.
The FBI said Longueuil destroyed a flash drive with damning information on it and dispersed its parts in various garbage trucks during a 20-block walk across the city.
Robert Khuzami, director of the SEC’s Division of Enforcement, said the hedge fund in question "claimed to run a clean operation."
Instead, he added, officials were able to "pull back the curtain and reveal that the only matching that was going on here was to match theft with greed."
As part of the plea deal, Freeman and Pflaum, who have pleaded guilty to conspiracy to commit securities fraud and securities fraud, face a statutory maximum sentence of 25 years in prison.
This comes as the feds have brought insider-trading charges against more than 30 people since October 2009.
"We have other cooperating witnesses that have not been disclosed," said Bharara, who added that more arrests are imminent.
A trial at the center of the ongoing probe, against former Galleon Group LLC co-founder Raj Rajaratnam, is scheduled to begin in Manhattan federal court at the end of this month.
We have now other cooperating witnesses who have not necessarily recently been disclosed, inch claimed Bharara, exactly who included of which much more busts usually are impending.The seo good site Sam Barai
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