Today the U.S District Attorney’s Office announced charges against four hedge fund employees as part of its sweeping insider trading investigation.
An interesting part of this particular complaint is that two of the individuals — hedge fund manager Samir Barai and junior portfolio manager Donald Longeuil — allegedly destroyed a ton of evidence that they believed would implicate them in the probe, after they read about the investigation in the Wall Street Journal.
As early as November 20, the day after the WSJ reported that the FBI was about to unleash a wave of insider trading charges, Barai sent a series of BBMs to Jason Pflaum, one his research analysts at Barai Capital, ordering him to go to his hedge fund’s office and destroy certain documents and digital recordings.
Huge mistake, since according to the FBI, Pflaum was already cooperating with the feds.
Barai wrote to Pfluaum:
“[s]hred as much as u can,” “[p]ut all ur data files onto an encrypted drive,” and “delete all emails from” two particular individuals.
He also told Pflaum that he’ already deleted his own emails.
Pflaum messaged Barai,
“Yo. Deleted them. Didn’t sleep so well last night. What else do you think we need to do?”
Then Barai continued with more now-incriminating BBMS:
- “So what if we talked to anyone”
- “They need proof that we acted on something”
- “And its hard to have that”
- “My sense is they tapped [the Firm] just recently…”
- “the more I think about it – just not enough clues to hold something on us”
- “There isn’t anything tho”
- “Nothing material”
- “We use all mosaic theory”
- “So we’re ok”
One day later, Barai told Pflaum to leave his laptop with his doorman so that Barai could pick up it up and “do a dept of defence delete,” to erase all records from the computer.
Later that night, Barai picked up the laptop, which he never returned.
Around the same time, Donald Longueuil — a former SAC Capital analyst — destroyed a flash drive and two external hard drives after he read the same WSJ article.
He later told Noah Freeman, who previously worked for SAC Capital and who was also charged with fraud and plead guilty, how he did it. Another big mistake, as Freeman was already cooperating with the feds. The FBI also obtained recordings of Longueuil leaving his apartment and returning after he’d dumped the evidence.
Here’s what Longueuil relayed to Freeman about his adventures in destroying damning evidence:
So I just [expletive] ripped it [referring to the flash drive] apart right there… I had two external drives that had like wafer numbers on ’em. [expletive] pulled the external drives apart. Destroyed the platter… Put ’em into four separate little baggies, and then at 2 a.m. … 2 a.m. on a Friday night, I put this stuff inside my black North Face [u/i] jacket,… and leave the apartment and I go on like a 20 block walk around the city… and try to find a, a garbage truck… and threw the [shit] in the back of like random garbage trucks, different garbage trucks… four different garbage trucks.
Here’s the part of the FBI complaint that refers to the obstruction:
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