Though they’ve just started levying serious subpoenas and search warrants, the FBI has apparently been investigating insider trading among hedge funds for the past three years.
This is after years of barely a murmur of an insider trading investigation since who, Ivan Boesky? That was years ago, which makes us wonder what has enabled the FBI to catch this huge ring of alleged insider traders this time around.
Perhaps it was this article in the Wall Street Journal.
And in the Financial Times this morning, we found another part of the answer.
The paper says three things are helping the FBI catch their men:
- Recently, the SEC beefed up their use of technology, building databases to track the connections among hedge funds, their investors and officers and sources of information about specific public companies
- The feds are tapping phones and finding co-operating witnesses who they wire before key conversations
- The feds may also be using the tactic of “tickling the wire,” meaning that the Feds have wiretaps in place and are placing stories in the media and then waiting for revealing phone conversations.
But mostly, the game-changer this time seems to be the Galleon case. Everyone who’s involved in the latest sting seems to be somehow connected to Raj Rajaratnam’s network.
The Feds, it seems, baited guilty parties with lighter sentences if they helped them catch more big fish.
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