US Federal authorities widened their crackdown on insider trading, uncovering an alleged network of conspirators with elements of a James Bond movie, including packages of money, throwaway cellphones, a ringmaster nicknamed “Octopussy” and an associate called “the Greek”.
In a 24-page criminal complaint filed in a New York federal court, prosecutors alleged that 14 individuals were part of an insider trading group that generated $20 million (around Rs94 crore) in illegal profits. The group allegedly included several hedge fund traders, two lawyers, a former junior analyst at a credit rating firm and a technology company executive. The charges mark a significant broadening of ongoing criminal and civil investigations into alleged insider trading on Wall Street, in Silicon Valley and elsewhere—the most sweeping insider trading case in decades.
Last month, charges were filed against hedge fund tycoon Raj Rajaratnam, founder of Galleon Group, and five others. Rajaratnam and his co-defendants, who were accused of reaping $20 million in illegal profits, have denied wrongdoing.
Some of the individuals charged on Thursday moved in the same circle.
In the complaint, the US alleged that Zvi Goffer, a former trader at Galleon and hedge fund Schottenfeld Group Llc, was the central figure in a ring that included his brother, a lawyer at Ropes and Gray Llp, and six other traders and hedge fund managers.
“The casual betrayal of corporate secrets by insiders...makes a mockery of our system,” said Preet Bharara, the Manhattan US attorney, at a news conference announcing the charges. A related civil case was filed by the Securities and Exchange Commission.
A lawyer for Goffer, who is 32 years old, declined to comment, as did a lawyer for his brother.
Rick Schottenfeld, founder of Schottenfeld Group, Goffer’s former employer, said: “We are deeply troubled and shocked by the criminal allegations” against Goffer. He added that no current Schottenfeld employees have been named in the case, and said the firm is cooperating with authorities.
Five of those charged on Thursday have already pleaded guilty and are helping prosecutors build a case, including three traders—Roomy Khan, C.B. Lee and Ali Far—previously identified by The Wall Street Journal as cooperating witnesses in the investigation.
The government alleges that the group affiliated with Goffer used non-public information to trade stocks of Avaya Inc., 3Com Corp., Alliance Data Systems Corp. and Axcan Pharma Inc. The complaint says the information included tips supplied by Arthur Cutillo, 33, an associate in the New York office of Boston-based Ropes and Gray, about buyout announcements involving those firms.
Jason Goldfarb, a Brooklyn lawyer, served as the intermediary between Cutillo and Goffer, the complaint says. The defendants allegedly used disposable cellphones to relay the information to one another. Lawyers for Cutillo and Goldfarb declined to comment.