22 November 2010

FBI Raids Two Hedge Funds In Insider Trading Case: Plus Ça Change?

Genuine enforcement or bread and circuses?

Only time will tell.

The fish seems to be getting a little bigger. But only a little, and still on the relative periphery of the school.

What will be most interesting to watch is how the investigations and settlements, if any, unfold. Will they be 'cost of business as usual with no admission of guilt' fines, or will serious federal prosecutors get involved and start turning over the small fry to get to the heart of the scandals. Will they merely rustle the branches or strike to the roots? That is the difference between the appearance and the reality of reform.

However it turns out, be aware that fraud is still pervasive on Wall Street and in the US markets, and the status quo has been maintained by both political parties who receive enormous funds from the corporations in the FIRE sector.

Connecticut is to financial racketeering what Chicago was to the Mob and Prohibition. But always the real power is headquartered in New York.

Massive Insider Trading Investigation Could Nail Wall Street's Biggest Names

I would be quite a bit more impressed if the raids were on a few of the TBTF banks who make these hedge funds look like small time street dealers by comparison. But that would expand the investigation uncomfortably close to the inner warrens of the Washington Beltway, and the real seats of power and corruption, the old powers and monied interests.

FBI Raids Two Hedge Funds Amid Insider-Trading Case

Federal Bureau of Investigation agents raided the Connecticut offices of hedge funds Diamondback Capital Management LLC and Level Global Investors LP amid a far-reaching insider-trading investigation.

"The FBI is executing court-authorized search warrants in an ongoing investigation," said Richard Kolko, an FBI spokesman, who declined to comment further.

Both hedge funds are run by former managers of Steve Cohen's SAC Capital Advisors. Level Global Investors LP is a Greenwich, Conn., hedge-fund firm run by David Ganek, a former SAC Capital trader and art collector. He started Level Global in 2003 and earlier this year reported managing about $4 billion in assets.

Diamondback Capital Management LLC is based in Stamford, Conn., and was started in 2005. It oversees more than $5 billion in assets, according to SEC filings.

The move by the FBI follows an article by The Wall Street Journal describing an insider-trading investigation that is expected to encompass consultants, investment bankers, hedge-fund and mutual-fund traders. The investigation is said by people close to the situation to eclipse in size and magnitude past insider-trading probes..."