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$62M Dell insider trading case charges 7

Posted: 20 Jan 2012 ?? ?Print Version ?Bookmark and Share

Keywords:hedge fund? insider trading? earnings announcement?

In a latest scandal that involved doubtful trading at hedge funds, U.S. prosecutors have charged seven people with running a $62 million insider trading scheme at Dell Inc. This is according to a report from Reuters that also compared the magnitude of insider trading gains of 'criminal club' to that Raj Rajaratnam, the convicted founder of the Galleon Group hedge fund.

Manhattan U.S. Attorney Preet Bharara described the incident as a sadly familiar story. "It describes a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered lucrative inside information."

Anthony Chiasson

Anthony Chiasson, who co-founded the Level Global Investors hedge fund, was charged with insider trading.

Dubbed 'Operation Perfect Hedge' by the FBI, the probe has examined suspected sharing of confidential business information with hedge fund managers and analysts. Rajaratnam was arrested as part of the investigation and is now serving an 11-year prison term following his conviction by jury trial last year.

The defendants arrested on Wednesday include Anthony Chiasson, who co-founded the Level Global Investors hedge fund. He turned himself in to the FBI in New York, an agency spokesman said. A U.S. magistrate judge released him on $5 million bail during a brief appearance in Manhattan federal court. Chiasson was not asked to enter a plea, but his attorney, Gregory Morvillo, said his client denied the charges.

Todd Newman, who headed technology trading for hedge fund Diamondback Capital Management from Boston, was also arrested. Diamondback said in a letter to investors on Wednesday that it had been 'proactively assisting' criminal prosecutors and the U.S. Securities and Exchange Commission in the case against Newman and another former employee, Jesse Tortora.

Chiasson and Newman are accused of illegally trading ahead of Dell's�earnings announcements for 1Q and 2Q of 2008, netting them profits, respectively, of $57 million and $3.8 million. Another defendant, Jon Horvath, is accused of making an illegal $1 million trade in Dell. Horvath was released on $750,000 bail after a court appearance in New York.

In a parallel civil action, the SEC said investment analyst Sandeep "Sandy" Goyal of Princeton, New Jersey, obtained Dell quarterly earnings information and other performance data from an insider at Dell in advance of earnings announcements in 2008.

Goyal tipped then Diamondback analyst Tortora of Pembroke Pines, Florida, with the inside information, and Tortora in turn tipped several others, leading to insider trades on behalf of Diamondback and Level Global hedge funds.

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