Last week, news broke of an alleged $32 million insider trading conspiracy dating back 17 years.In the FBI and SEC complaints, there were two named protagonists — Matthew Kluger, an M&A lawyer, and Garrett Bauer, a prop trader. But there was also a mystery middleman known only as “CC-1” in the FBI’s complaint.
According to the FBI, coconspirator 1 was a resident of Long Beach; was “at one time, a registered trader but primarily worked in the mortgage loan business”; worked briefly with Kluger at a real estate firm in 1991; worked for two or three years with Bauer at Venture Capital firm Weisss, Peck & Greer; and became close friends with both men independently of the other.
That intermediary is reportedly a man called Kenneth Robinson.
And he “was the linchpin of the government’s case, secretly recording conversations with both men and unravelling the 17-year operation between Mr. Bauer and Mr. Kluger, who otherwise scarcely had a relationship,” Dealbook reported.
Robinson is “scheduled to plead guilty” to securities fraud and conspiracy charges as early as today, Bloomberg reported.
The alleged conspiracy was only possible with Robinson’s involvement, but at the same time, the alleged scheme might never have been revealed had Robinson not traded on two tips in 2009 and 2010 and passed them along to Bauer, the WSJ reported.
Robinson is said to have earned over $690,000 on bets on 3Com before it was purchased by Hewlett-Packard.
Apparently those two trades helped the SEC connect Robinson to Bauer in March, because the agency had already suspected Bauer had a source at law firm Wilson Sonsini due to his trading patterns, “but given the size of the firm, they couldn’t pinpoint the person’s identity,” the WSJ said. “By trading ahead of deals in which the same law firm was involved, Mr. Robinson gave investigators a lead, and they were able to connect him to Mr. Bauer, and ultimately, to Mr. Kluger.”
As a reminder, the alleged scheme worked like this: Kluger would pass information about impending M&A deals to Robinson, then Robinson would relay the information to Bauer, who executed the trades.
After the FBI and IRS raided Robinson’s Long Island home in March, he agreed to record calls with Kluger and Bauer, and the rest is history.
So what do we know about Robinson?
According to Dealbook, he’s in his mid-40s, and after stints in the early 90s at the real estate company where Kluger worked, and Weiss, Peck & Greer (where he worked with Bauer), he scored a job with Dean Witter in 1996. However, “he was dismissed from that position the following year because he was ‘unable to perform at acceptable standard for his position.'”
A neighbour told Dealbook Robinson was “a family man” who had toys we “strewn across the backyard of the home.” Another neighbour said ” he was one of the nicest guys I know. Ken is American pie.”
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