The FBI and SEC filed criminal and civil charges, respectively, against a California hedge fund manager and his firm for allegedly trading on nonpublic information obtained from a Galleon hedge fund employee.Whitman Capital’s head portfolio manager Douglas Whitman surrendered to Federal authorities this morning in Manhattan, an FBI spokesperson told Business Insider.
Both agencies allege Whitman and his firm used nonpublic information regarding tech stocks to reap nearly $1 million in illicit profits.
The hedge funder has been accused of allegedly trading stock in Google and Polycom from 2007 to about 2009 using nonpublic information about earnings provided by Roomy Khan, who the SEC describes as a “friend and neighbour” who worked at Raj Rajaratnam’s Galleon hedge fund.
Kahn has already pleaded guilty to insider trading charges and is awaiting sentencing, according to statement from the FBI.
Whitman has also been accused of allegedly buying and selling Marvell Technology stock and options from 2007 to 2009 based on material information given by Karl Motey, an independent research consultant, according to the indictment.
Motey has pleaded guilty to insider trading charges and is also currently awaiting sentencing, the FBI statement said.
“Trading on inside information, whether it comes directly from industry insiders or is channeled through conduits, is illegal. Whitman recognised the value of the information he got, and paid cash for it in one case, and bartered his own inside information in the other. As today’s charges show, our efforts to police the securities marketplace are unwavering,” Janice Fedarcyk, FBI Assistant Director-in-Charge said in a statement.
Whitman has been charged with two counts of conspiracy to commit securities fraud and two counts of securities fraud, according to the indictment.