Federal authorities made more arrests Wednesday in connection with a government crackdown on insider trading.
The FBI took three people into custody: Anthony Chiasson, co-founder of failed hedge fund Level Global; Todd Newman, a former portfolio manager with hedge fund Diamondback Capital Management; and Jon Horvath, a technology analyst with Sigma Capital Management. Federal prosecutors in New York are expected to release more information about the three individuals later today.
Level Global, which Chiasson launched with trader David Ganek in 2003 and which once had $4 billion under management, and Diamondback became targets of the federal insider-trading probe in 2010. Both firms have since shut down.
The arrests likely relate to the government's efforts to disrupt so-called "expert networks," in which hedge funds pay corporate or industry insiders for information about a given company or sector. The Wall Street Journal reports:
The charges Wednesday appear to hew to a pattern emerging in the government's insider-trading investigation, in which tight-knit circles of associates at different firms are accused of pooling their information for mutual benefit.
Mr. Horvath was part of such an information-sharing circle along with former Level Global technology analyst Spyridon "Sam" Adondakis, former Diamondback analyst Jesse Tortora, and Neuberger Berman Group LLC analyst Fayad Abbasi, according to a person familiar with the matter.
Level One has been linked with an expert-network firm called Primary Global Research, which connects major investors with corporate insiders. In a court case last month in New York, federal prosecutors alleged that an employee of PGR who also worked at Taiwan Semiconductor supplied Level One with confidential information about the chipmaker. Level One reportedly used the information in trading Taiwan Semiconductor's stock, making a $1.7 million profit.
A number of outside experts retained by hedge funds have been indicted on allegations of insider trading, and some jailed. In December, former hedge fund consultant and PGR employee James Fleishman was sentenced to 2 1/2 years in prison after being convicted of conspiracy and wire fraud. Prosecutors said he made more than
$800,000 for three years of working at the expert-network firm.
As part of a broader government investigation, former Galleon Group founder Raj Rajaratnam in October was sentenced to 11 years in prison. That case, which centered on nonpublic information passing between Rajaratnam and a ring of corporate insiders, resulted in more than two dozen convictions.