The first shot in what might be the largest insider trading case in history may have been fired Mon. In an action linked to the insider trading probe, two hedge funds in Greenwich, Connecticut, were raided by the Federal Bureau of Investigation. More than thirty businesses in the economic industry were subpoenaed last fall by the Securities and Exchange Commission, which is investigating deals leading up to the economic crisis that might result in charges before year’s end.
Outcomes that come from SEC investigation that take 3-years
Corporations will sometimes purchase stock in a business, or bet against it, before a deal is made public. This is what insider trading is. When the value of those shares rises after the deal is announced, the inside traders sell them. The SEC is putting the finishing touches on a three-year investigation that is expected to result in insider trading charges against independent consultants, Wall Street banks, hedge funds and mutual funds across the U.S. Authorities told the Wall Street Journal that criminal and civil probes are looking at several insider trading rings that made tens of millions in illegal profits.
Goldman Sachs a target too
Leading up to the economic crisis, it is suspected that data about the health care takeover deals was leaked by Goldman Sachs bankers which is one of the parts of the Securities and Exchange Commission insider trading investigation. Another focus of the probe is on “expert network” firms hiring former employees of companies targeted for acquisition that pass along advice to hedge fund investors. According to Integrity Research Associates, more than a third of hedge funds use expert networks. Many independent analysts and research boutiques are feeling it hard as well. It is coming down hard.
FBI participation indicates incarceration onward
It is expected that federal prosecutors will file criminal and civil insider trading charges. Before the end of the year, they will start this. The SEC has had the FBI and U.S. prosecutors included with the whole thing. Hard incarceration will likely be the result because of this. This would be different than the civil suit brought by the Securities and Exchange Commission against Goldman Sachs for mortgage fraud last summer. Goldman Sachs wriggled off the hook on that situation by paying the largest penalty ever by a Wall Street firm. The fee was $550 million. That's about how much Goldman Sachs makes in profit in just two weeks.
Articles cited
Wall Street Journal
online.wsj.com/article/SB10001424052748704170404575624831742191288.html
MSNBC
msnbc.msn.com/id/40317931/ns/business-us_business/
Politics Daily
politicsdaily.com/2010/07/16/goldman-sachs-fine-in-fraud-case-wall-street-firm-can-afford-it/
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