Despite all the criticism of the ability of the SEC to detect or prevent financial fraud, the agency does a great job of finding insider trading. Of course, most insider trading is incredibly easy to detect. You simply look for unusual trading patterns ahead of a deal and then figure out who knew whom. That seems to be how the SEC caught a 33 year old Blackstone managing director who allegedly tipped off a financial analyst about a take private deal.
The U.S. Securities and Exchange Commission has sued a managing director at private equity firm Blackstone Group for an insider trading scheme involving shares of supermarket chain Albertsons, the Dow Jones news wire said on Tuesday.
Dow Jones said Blackstone managing director Ramesh Chakrapani supplied a friend with material nonpublic information about Albertsons’ acquisition before the deal was announced. According to the report the scheme brought in more than $3.6 million in illegal profits.
A group including of Supervalu, CVS and private equity firm Cerberus bought Albertsons in 2006. The SEC alleges that Chakrapani was part of the Blackstone team that advised Albertson’s on the deal.
“We are shocked by this alleged breach of the law and violation of our own compliance policies and ethical standards,” said Blackstone spokesman Peter Rose. He said the company was fully cooperating with authorities.
Chakrapani worked at Credit Suisse before joining the Blackstone Group. He graduated from Yale.