WOW! The FBI has just arrested two more people for alleged insider trading, and this is a big one, replete with burnt cash, prepaid cell phone destruction, wiretaps and all. All that is missing is a great nickname like Octopussy.
According to CNBC, a trader named Garrett Bauer is alleged to have made over $32 million trading on tips recieved from Matthew Kluger, a lawyer who has worked at some of the worlds most pretigious law firms over a seventeen year legal career. According to US Attorney Paul Fishman, Mr. Kluger, currently a Washington, D.C. based mergers and acquisiton lawyer with Wilson Sonsini Goodrich & Rosatii PC, allegedly “stole trusted secrets” and passed along the stolen information to an unknown tippee, who passed the information on to Mr. Bauer. Kluger allegedly obtained the prized deal information by seaching the law firms’ computer systems. According to Mr. Fishman, before Wilson Sonsini, Mr. Kluger previously stole and passed along inside information from two of the world’s most prestigious mergers and acquisition law firms: Skadden, Arps, Slate, Meagher and Flom, and Cravath, Swaine & Moore.
Wow! If this is all true, Kluger and Bauer (hey, isn’t that a great name for a law firm?) are big-time criminals, and certainly deserve to rot in prison. Time will tell with these two guys. I ask myself, is this just the tip of the iceberg? Sure seems that way if you believe what you see on televison and read in the papers. Can there be any doubt that we will soon here about another expert network arrest, or the unwinding of another big hedge fund unable to survive investor redemption requests after being raided by the F.B.I? All of this begs the question: Why are so many hedge funds managers and traders being arrested for insider trading?
In my opinion, this battle to clean up Wall Street is being led by S.E.C. Chairman Mary Schapiro and her Director of Enforcement Robert Khuzami. To win the propaganda war, and to secure the necessary funding it needs for further enforcement actions, the average Joe on Main Street needs to believe this scourge of Wall Street is rampant, and believe that it somehow threatens his livelihood. Enter U.S. Attorney for the Southern District of New York, Preet Bharara, who is continuing to wage war against traders, hedge funds and other proprietary trading shops. According to Mr. Bharara (derisively referred to as “Tweet Piranha” by those who believe that his trademark tenacity and seeming voracious appetite for Wall Street trader meat has gone a bit too far), “illegal insider trading is rampant and may even be on the rise”. Consequently, Mr. Bharara is on a self-professed mission to catch all those modern day Gordon Gekko’s, and prove to the world that, in fact, “sometimes, greed is not good.”
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