Unstructured Finance

Gordon Gekko’s Perfect Hedge

February 29, 2012

By Matthew Goldstein and Jennifer Ablan

It’s not every day a public service announcement, much less one for the FBI, makes national headlines. Then again, it’s not every day that Michael Douglas reprises his Gordon Gekko role to make a pitch for informants to come forward and help law enforcement smoke out insider traders.

The ad, which has been featured on network newscasts and was heavily touted on the front-page of The Wall Street Journal, highlights the task at hand for the likes of David Chaves, a senior agent with the Federal Bureau of Investigation.

“It’s gone viral,” says Chaves, who is one of the masterminds behind “Perfect Hedge,” the long-running undercover operation that has helped federal prosecutors secure the convictions of more than 50 people on insider trading charges.

The most famous conviction secured by the Perfect Hedge task force is multimillionaire Galleon Group hedge fund founder Raj Rajaratnam and dozens of traders.

Chaves says the FBI coined its investigation Perfect Hedge as it involves an investment strategy position or positions that eliminate all market risk from a portfolio – rarely found – but an occurrence typically with insider’s information.

The FBI debuted the Douglas PSA on Monday, during a media briefing in New York and Washington, D.C. It was an opportunity for federal agents to crow about some  of their successes in rounding up rogue hedge fund traders and other financial flim-flam artists.

Chaves, who was the master of ceremonies at the New York presentation, says the FBI’s work on Perfect Hedge is far from over. He expects many more arrests in the future based on all the cooperators agents have flipped and hours of hours of still secret wiretapped phone calls.

In fact, The Wall Street Journal got Chaves to fess up that law enforcement has its sights on as many 120 potential insider traders at hedge funds, mutual funds and corporate America.

Chaves won’t talk about that list of 120 targets now. But it’s pretty clear whether the real number of potential targets is 50, 100 or 120 people—law enforcement is going to be busy for quite a while. And that message should send a bit of chill to wealthy hedge fund managers in Manhattan or operating along the tree-lined streets Greenwich, Conn.

Anyway, in our endeavor to keep the PSA going viral on the Internet, here’s a link to the ad.

 

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