The Securities and Exchange Commission filed civil charges against Diamondback Capital Management, based in Stamford, Conn., and Level Global Investors, based in hedge-fund capital Greenwich, Conn., and against seven individuals.
Level Global netted $72.6 million of illegal gains trading in securities of Dell and another company, Nvidia, the SEC said. About $53 million of that was tied to information about one quarterly earnings announcement in August 2008, the SEC said.
In sheer dollars, the case is comparable to the celebrated one against Galleon Group boss Raj Rajaratnam, who was convicted of fraud last year and sentenced to 11 years in prison.
The Justice Department announced criminal charges in the case Wednesday, citing seven individuals, three of whom have pleaded guilty.
At a Manhattan news conference, U.S. Attorney Preet Bharara said that insider trading has become “rampant and routine.” The latest conspiracy painted “a stunning portrait of organized corruption on a grand scale,” he said, adding that authority figures at several investment firms encouraged the lawbreaking.
The secretive and often lucrative hedge fund business owes part of its success to basic cheating, the government says.
“When you have the answer sheet beforehand, it’s pretty hard not to ace the test,” said Janice K. Fedarcyk, assistant director in charge of the FBI’s New York office.
The individuals charged by the SEC and Justice Department included Jon Horvath, 42, a technology research analyst in New York. A person familiar with the case said that Horvath has been employed by Sigma Capital, an affiliate of SAC Capital, a giant hedge fund manager. The person spoke on the condition of anonymity because SAC was not named in Wednesday’s action.
Horvath “caused insider trades at his firm that resulted in approximately $1.4 million of illicit gains,” the SEC said.
SAC Capital spokesman Jonathan Gasthalter said that the firm is continuing to cooperate with the government investigation but declined to comment further.
Defendants in the overlapping civil and criminal actions included Anthony Chiasson, 38, a founding partner at Level Global; Spyridon Adondakis, 40, who was an analyst at Level Global; Sanheep Goyal, 39, who was a manager of corporate planning at Dell before entering the investment business; Todd Newman, 47, who was a portfolio manager at Diamondback; Jesse Tortora, 34, who was an analyst at Diamondback; and Danny Kuo, 36, who has worked at Whittier Trust and for Merrill Lynch and J.P. Morgan Securities.
The Justice Department on Wednesday unsealed guilty pleas by Adondakis, Goyal and Tortora.