Busted! Insider Traders Accused Of Reaping $61.8 Million On Dell, Nvidia Stock

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The FBI’s crackdown on insider trading continues with the arrests of seven traders who made a killing on Dell and Nvidia stock. This is the largest bust of an insider trading scheme involving a single stock to date.A former Dell employee, Sandeep Goyal, was among those arrested, according to a press release from the U.S. Attorney’s office. An unnamed Dell employee working in the company’s investor relations team is also accused of being in on the scam. Goyle had since been working as a junior research analyst at the Manhattan office of Neuberger Berman.

Along with Goyal, the notorious Apple analyst Jesse Tortora and Spyridon Adondakis pleaded guilty, the Attorney’s office said. Other traders charged include Jon Horvath, Danny Kuo, Todd Newman, Anthony Chiasson. The ring worked at three hedge funds and two other investment firms.

The firms were allegedly trading Dell and NVIDIA stock based on tips obtained by employees who worked at the companies. The events (and the press release) sound like a bad Hollywood movie  … (queue music: theme from The Sting). The Attorney’s office explained:

“In 2008 and 2009, TORTORA admitted to providing ADONDAKIS, HORVATH and KUO with Inside Information related to Dell’s first and second quarter 2008 earnings that he had received from GOYAL, who had a source inside Dell’s investor relations department.”

All told the three hedge funds netted “more than $61.8 million in illegal profits” and one of the investment firms avoided $78,000 in losses, the Attorney’s office said. $53 million was made in a short trade of a single stock.

Goyal was allegedly paid more than $100,000 in kickbacks.

Each of the traders faces a maximum sentence of 25 years in prison.

The FBI has arrested 60 people so far on its hedge fund crack down, it said. The most famous are Galleon hedge fund manager Raj Rajaratnam, who is now serving an 11-year setence. Former Goldman Sachs director Rajat Gupta is awaiting his trial to begin in April.