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Hedge Fund Managers Arrested for Insider Trading

February 08, 2011 at 10:16 AM
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Two hedge fund managers were arrested on insider trading charges Tuesday, while another portfolio manager and an analyst agreed to plead guilty in connection with the probe, the latest development in a broad investigation of hedge funds' trading activities.

Reuters reports the charges were announced by federal prosecutors, who are investigating the ties between hedge funds and consultants for so-called expert networking firms that are accused of improperly leaking confidential corporate information to investors.

The news service says the latest charges involve a portfolio manager and an analyst who both once worked for hedge fund titan SAC Capital Advisors. SAC itself has not been charged with any wrongdoing.

According to Reuters, hedge fund managers Sam Barai, head of Barai Capital Management, and Donald Longueuil, who previously worked for SAC and later for a fund not identified in court documents, were arrested, authorities said. The other defendants, who have reached plea deals according to court documents, are portfolio manager Noah Freeman, a former analyst at hedge fund Sonar Capital in Boston and later a portfolio manager at SAC Capital, and Jason Pflaum, an analyst who worked with Barai.

Barai's fund was one of four raided by federal agents late last year when the trading probe was heating up. The raids shocked the hedge fund world, and were followed by dozens of subpoenas to hedge funds and mutual funds including SAC that did business with various expert network firms and consultants.

Barai was charged with securities fraud, conspiracy and obstruction of justice, according to the court documents. He is accused of engaging in insider trading involving shares of Marvell Technology Group Ltd and Fairchild Semiconductor International Inc. Freeman and Pflaum are cooperating with prosecutors, according to the court papers. Longueuil was charged with conspiracy and obstruction of justice, according to the court papers.

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