Tuesday, February 8, 2011

The Latest In Insider-Trading Gate: Two Former SAC Traders Charged

The latest development in the insider trading gate, whose sole target is and has always been SAC, appears to be closing in on the target. According to a press release to be held shortly, two former SAC employees are about to become cooperating witnesses for the government. The ex-SACites are Noah Freeman and Donald Longueuil, which according to Bloomberg worked at the fund between 2008 and 2010. The full conference by US Attorney Preet Bharara is due any moment. This is likely just an intermediate phase before the big names start being accused as bigger cases are built against those at the very top.
From Bloomberg:
Noah Freeman and Donald Longueuil, former employees of SAC Capital Advisors LP according to a person familiar with the matter, were charged as part of a nationwide investigation of insider trading at hedge funds, technology companies and so-called expert networking firms.

Longueuil worked at SAC Capital-unit CR Intrinsic from July 2008 to July 2010 and Freeman worked at SAC Capital from June 2008 to January 2010, according to the person, who declined to be identified because the matter isn’t public. Charges against three hedge fund managers and an analyst were announced today by U.S. Attorney Preet Bharara in Manhattan. Counts against two of them are to include obstruction of justice, Bharara said.

Samir Barai was also charged by federal prosecutors in New York, according to court documents. Freeman and Jason Pflaum reached a plea agreement with prosecutors, according to the filings. Winifred Jiau, already charged as part of the probe, communicated with Barai and Freeman, according to court papers.

Barai, founder of Barai Capital Management, is co- conspirator 1, or “CC1,” in the complaint filed in December against Jiau, an ex-consultant for expert-networking firm Primary Global LLC, according to a person familiar with that case.
A profile of all 4 charged hedge funders is below courtesy of the WSJ:
Samir Barai, of Barai Capital Management

Barai in 2008 ordered up purchased of stock in tech companies — including Marvell Technology and Fairchild Semiconductor — after being on the receiving end of their corporate secrets, according to the government charges unsealed today.
Barai in November also told one of his colleagues to destroy “documentary and digital records after reading articles about a federal grand jury investigation into insider trading,” according to the government complaint today.

The Wall Street Journal reported last month that Barai was an unnamed co-conspirator in a December criminal complaint. Prosecutors said a hedge fund, which the Journal has identified as Barai Capital, received more than $820,000 in May and June 2008 from trading ahead of Marvell’s earnings.
Barai until 2007 ran a tech-stock portfolio at Citigroup’s internal hedge-fund division, and then he left to found his own investment firm. FBI agents raided his hedge fund in November, the Journal reported last month. Samir Barai and other employees of Barai Capital either didn’t respond to requests for comment or declined to comment for last month’s stories in the Journal.

Donald Longeuil
Longeuil, 35 years old, left CR Intrinsic Investors LLC, a division of SAC Capital, about a year ago, the Journal is reporting. The government complaint today says Longeuil destroyed a computer flash drive and external hard drives in November, after reading about an investigation into insider trading.

Jason Pfaum
A technology analyst at Barai Capital Management, Pfaum pleaded guilty on charges of conspiracy and securities fraud and has been cooperating with prosecutors in their insider trading investigation, according to the legal filings today. In 2008, according to the government, Pfaum talked with an employee at Fairchild Semiconductor to glean secrets about the company. Barai then a day later ordered the purchase of about 95,000 Fairchild shares, according to the legal complaint.

Noah Freeman
Freeman worked at hedge fund SAC Capital’s Boston office from 2008 until January 2010, the Journal is reporting. Freeman, whom the government describes as a specialist in the tech and semiconductor industries, “maintained a network of sources who provided Freeman with Inside Information regarding public companies,” including Marvell, Nvidia, Fairchild and Actel, according to the legal filings released today.
Full complaint against Barai and Longueuil: Barai Complaint

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