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By David Glovin, Bob Van Voris and Joshua Gallu
https://www.bloomberg.com/apps/news?pid=20601103&sid=ajLR2o1hcbTY
Nov. 6 (Bloomberg) — U.S. prosecutors charged 14 people, including hedge fund managers, lawyers and an ex-Galleon Group employee, for using the methods of “drug dealers” and “common criminals” to profit on insider data from deals involving firms such as 3Com Corp. and Alliance Data Systems Corp.
The charges, brought as part of a wide U.S. probe of Galleon founder Raj Rajaratnam, bring the illicit profits in the case to as much as $53 million. Five of those whose cases were unsealed yesterday have pleaded guilty and are cooperating in the investigation, prosecutors said.
At the center of a new insider trading ring are Zvi Goffer, 32, a former Galleon employee who sought tips, and Arthur Cutillo, 33,(Ridgewood N.J.) an attorney at Ropes & Gray LLP and the ring’s key source of information, federal officials said. Goffer, founder of Incremental Capital LLC, paid tipsters including Cutillo for information on mergers and acquisitions, giving them pre-paid mobile phones so they could avoid surveillance, the U.S. said.
The defendants behaved like “common criminals” who took a “page from drug-dealer handbooks,” Manhattan U.S. Attorney Preet Bharara said yesterday at a press conference. The probe is focused on hedge funds and their sources of information, he said, adding that more arrests may be coming.
As with Rajaratnam, investigators used wiretaps, data- mining and surveillance to target the ring. Authorities have struggled to build cases against large institutional investors such as hedge-fund managers, who often seek to deflect regulatory queries about suspiciously timed bets by arguing they’re statistical flukes amid millions of trades.
https://www.bloomberg.com/apps/news?pid=20601103&sid=ajLR2o1hcbTY
