The drama in a major insider trading probe intensified Monday. The FBI raided the offices of two Greenwich, Connecticut hedge funds as part of the insider trading situation. In a probe that analysts suspect might lead to criminal charges soon, the SEC subpoenaed more than thirty firms that might have been doing illegal deals in a craze of activity leading up to the near collapse of the financial system.
SEC probe that takes three years to get outcomes
It’s considered insider trading when a person, before making a deal public, will purchase stock in a company or bet against it. The inside trader will sell stocks after the deal is announced and the price has gone up. Across the United States, in theory, insider trading charges ought to be proved to have happened against independent consultants, Wall Street banks, hedge funds and mutual funds by the SEC three-year probe. Many insider trading rings that made millions of dollars in illegal profit are being searched out by criminal and civil probes, the Wall Street Journal accounts.
Target is Goldman Sachs
Leading up to the financial crisis, it’s suspected that information about the health care takeover deals was leaked by Goldman Sachs bankers which is one of the parts of the SEC insider trading investigation. Another focus of the investigation is on “expert network” firms hiring former employees of companies targeted for acquisition that pass along advice to hedge fund investors. Expert networks are used for over a 3rd of hedge funds, accounts Integrity Research Associates. Many independent analysts and research boutiques are feeling it hard too. It is coming down hard.
Likely to be some jail time through the FBI
It is expected that federal prosecutors will file criminal and civil insider trading charges. Before the end of the year, they will begin this. The Securities and Exchange Commission has had the FBI and United States prosecutors involved with the whole thing. Hard jail time 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. The only reason Goldman Sachs got out of that case was by paying a huge penalty fee. The Wall Street firm had never seen a payoff that large before. About two weeks of Goldman Sachs profits were used to pay for the $550 million fee.
Information from
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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