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Do Galleon’s tentacles reach to Chicago?
It appears Chicago-based Balyasny Asset Management may have been drawn into the Galleon insider trading scandal.
Hedge Fund Alert is reporting that a former Balyasny analyst is drawing scrutiny from securities regulators in connection with the fast-growing insider trading case that has led to the filing of either criminal or civil charges against 20 people. The $2 billion hedge fund reportedly notified some of its investors that the Securities and Exchange Commission has been investigating the unnamed analyst’s activities for several weeks.
Balyasny, according to Hedge Fund Alert, recently invited the SEC in to review its books and records. The hedge fund has told its investors that the SEC review is focused on the former analyst and not the firm itself. The former analyst worked in Balyasny’s New York office.
Barry Colvin, Balyasny’s vice chairman, wouldn’t say when the analyst left the hedge, nor would he discuss how the fund became aware that regulators were reviewing the analyst’s activities.Â
Galleon arrests
Federal authorities have arrested eight additional people in connection with the Galleon insider trading scandal. And later today prosecutors intend to announce the filing of charges against 14 new defendants–including the eight arrested today, people familar with the case say.
In all, this means there will be 20 defendants in this fast-growing case.
On Wednesday, I wrote a column about how the Galleon insider trading case is like a jigsaw puzzle with several pieces left to be snapped into place by federal authorities. Will the latest developments reveal just how far the outer boundaries of the Galleon puzzle extend?
Galleon’s edge
The arrest of hedge fund millionaire Raj Rajaratnam on charges that he and his $7 billion Galleon Group hedge fund profited from illegal insider trading will no doubt feed suspicion in some corners about the way hedge funds generate fat profits.
But for anyone to assume that all hedge fund managers owe their success to getting information on the sly is unfair and wrong. The overwhelming majority of hedge funds are only as good as the quality of the research performed by their analysts and traders.
The guessing game ahead of Dell-Perot deal
In retrospect, it’s easy to say we could have guessed it:
Why didn’t some investors put 2+2 together and figure out that Perot Systems might be a target for Dell — before that is, Dell announced its $3.9 billion cash deal to buy Perot.
Looking back at Perot’s share performance, the stock has been building up momentum since July, despite warning of weak earnings in its August 4 quarterly report. The stock, which traded under $15 throughout the first half of the year, had built to $18 by last week. Perhaps this was early optimism about 2010 prospects. But the other explanation is some timely speculation that Perot was a logical target for fellow Texan company Dell.
UBS’ days of wine and CDOs
Expensive wines and toxic assets are rarely mentioned in the same breath.
But that was the talk at UBS during the summer of 2007, when the Swiss banking giant sold some $35 million in soon-to-be rotten collateralized debt obligations to Pursuit Partners, a Connecticut hedge fund, which is now suing the bank.
Last week, a Connecticut judge ruled that Pursuit had presented sufficient evidence that UBS sold the CDOs even though the bank had confidential information that Moody’s Investors Service was planning to slash its credit ratings on those subprime-backed securities.
Wall Street may find itself on the hook
Sometimes legal fishing expeditions pay off.
A year ago, a Connecticut hedge fund sued UBS, contending that it knowingly sold toxic mortgage-backed securities to institutional investors but never disclosed that information.
At the time, the accusation by the fund, Pursuit Partners, seemed intriguing. But because the complaint lacked any sign that it had the beef to back up its potentially explosive claim, the litigation all but fell off the radar screen.
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The Wall
