As reported by CNBC, seven people have been arrested—and another seven have been charged—in a widening federal investigation of insider trading in the hedge fund industry.
The new defendants include hedge fund traders and money managers, a mergers and acquisitions attorney, a corporate executive, and an associate analyst for the Moody’s credit rating agency.
In addition, the SEC has announced that it has amended its complaint in its insider trading enforcement action against billionaire Raj Rajaratnam and Galleon Management LP by charging 13 additional individuals and entities.
The SEC also announced today that in a separate complaint it has charged a pair of lawyers for tipping inside information in exchange for kickbacks as well as six Wall Street traders and a proprietary trading firm involved in a $20 million insider trading scheme.
The new arrests this morning stem from the same probe that led to the arrest last month of Galleon Group founder Raj Rajaratnam. As in the Rajaratnam case, authorities uncovered the alleged insider trading with wiretaps and confidential informants.
But the new charges appear to go far beyond the Galleon case.
The new case alleges that money manager Zvi Goffer led an insider trading ring, first based at the Schottenfeld Group, where he worked in 2007. Goffer then moved on to Galleon, then started his own firm, Incremental Capital.
Much of the alleged insider trading involved the private equity boom in 2007, according to the complaints.
Goffer allegedly supplied his tipsters with pre-paid cellular phones in order to conceal their activity, and paid them in cash.
The alleged tipsters include two attorneys, Arthur Cutillo of Ropes & Gray in New York, and Jason Goldfarb, whose firm was not identified. The two allegedly tipped Goffer and his associates about upcoming private equity takeovers of firms including 3Com , Avaya , Axcan Pharmaceuticals and Hilton Hotels .
In a separate complaint, prosecutors charged Moody’s Associate Analyst Deep Shah with providing inside information about the 2007 takeover of Hilton to a confidential informant.
