Latest insider trading case focuses on hedge funds

Associated Press Modified: November 14, 2012 at 12:17 am •  Published: November 13, 2012
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NEW YORK (AP) — A money manager the government says set a record by making $50 million on a single trade based on inside information went on trial Tuesday as a prosecutor promised to take jurors "into the world of hedge funds."

Anthony Chiasson, a co-founder at former hedge fund group Level Global Investors, is standing trial on insider trading charges along with Todd Newman, a Needham, Mass., hedge fund portfolio manager. Lawyers for the men said they did nothing wrong, relying on research conducted by analysts that the government now says were corrupt.

Assistant U.S. Attorney Richard Tarlowe said both men benefitted from a "corrupt chain of people who shared secret inside information" with one another.

He said Chiasson made about $50 million and Newman recorded a $2.8 million profit for his hedge fund when both learned that Dell Inc. was going to disappoint investors when it announced in the summer of 2008 that gross margins were lower than expected. Tarlowe said prosecutors would show jurors emails, instant messages, summaries of stock trades and phone records to support the testimony of four individuals who were part of the insider trading chain.

The witnesses "will give a neat window into criminal activity that only a participant can provide," he said.

At a news conference in January, U.S. Attorney Preet Bharara said the Dell trades represented the largest transaction ever prosecuted in Manhattan. He said it was part of a $78 million scheme.

At one point during his opening statement, Chiasson told jurors: "We will take you into the world of hedge funds."

Chiasson's defense lawyer, Reid Weingarten, suggested he will do the same by describing a highly competitive hedge fund industry that relies on analysts with inflated egos who compete ferociously to get information that others don't have, sometimes through insiders at public companies and 6through other research.