Two Former Hedge Fund Managers Found Guilty of Insider Trading

on Dec 18, 2012

On Monday 17 December news agency Reuters reported that two hedge fund managers were convicted for trading on insider information in Dell stocks.

Anthony Chiasson, co-founder of Level Global Investors, and Todd Newman, former Diamondback Capital Management portfolio manager, were found guilty of securities fraud that led to profits of more than $72 million (£44 million). The sentences, which could be as harsh as 20 years in prison, will be given by US District Judge Richard Sullivan on 19 April.

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According to Bloomberg, during the trial assistant US attorneys Richard Tarlowe, Antonia Apps and John Zach argued that the two portfolio managers were part of a “corrupt chain” of investors and analysts who exchanged and traded on illegal tips between 2007 and 2009.
One of the co-operators in the trial was Jesse Tortora, a former analyst at Diamondback who used to work for Mr Newman. Mr Tortora claimed that Sandeep “Sandy” Goyal, a Neuberger Berman analyst who once worked at Dell, repeatedly gave out insider information about the technological company including revenue numbers, sales and margins, allowing Mr Newman to make millions.

Reid Weingarten and John Nathanson, the lawyers for Mr Chiasson and Mr Newman respectively, argued last week that their clients were not aware the information they received was non-public. Both lawyers pledged they will appeal the jury’s decision.
**Former Home Diagnostics CEO Dodges Prison**
George Holley, former chief executive at Home Diagnostics, was sentenced to three years after pleading guilty on 8 August to two counts of securities fraud. Mr Holley admitted that he tipped his cousin and friend three weeks before the official announcement that the Japanese based Nipro Corp would buy his company.

!m[Growing Number of Insider Trading Cases in the US Shakes Confidence in Wall Street](/uploads/story/1054/thumbs/pic1_41_inline.png)
Nipro acquired the company for $215 million (£133 million) in February 2010, which pushed Home Diagnostics’ share price up by 89 percent. The firm is now known as Nipro Diagnostics and makes blood glucose monitoring systems and disposable supplies for diabetics.

“We always felt that a probationary sentence was appropriate in this case, and we are very gratified that that sentence was ultimately imposed,” Mr Holley’s attorney Kevin Marino said. “Mr. Holley has lived an extraordinary life marked by generosity of spirit and philanthropy. He regrets his foolish mistake.”
**SEC Raises New Charges**
Last week the US Securities and Exchange Commission (SEC) charged the manager of two US hedge funds with insider trading involving Chinese bank stocks. Sung Kook Hwang, founder of Tiger Asia Partner and Tiger Asia Management, has allegedly committed trading on illicit information between December 2008 and January 2009 making profit of $16.7 million (£10.3 million). To settle the charges Mr Hwang and his two funds have agreed to pay a compensation of $44 million (£27 million), according to the SEC.
Global Times reported that since October 2009, SEC has filed over 175 insider trading actions and has charged more than 400 individuals.


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