Indian-origin man charged Insider trading case in US

New York (PTI) US prosecutors have charged Samir
Barai, an Indian-origin former hedge fund manager at
Citigroup, with conspiracy to commit securities and wire fraud
as part of a wide-ranging investigation into the country's
biggest insider trading case.
39-year-old Barai, also founder of New York-based USD 100
million Barai Capital Management, surrendered to the FBI
on Tuesday.
He has been charged with conspiracy to commit securities
and wire fraud for his involvement in insider trading.
Three others charged along with him by prosecutors in New
York are Donald Longueuil, who formerly worked as a research
analyst, Ason Pflaum, a former research analyst for Barai and
Noah Freeman, a portfolio manager at a fund.
Barai and Longueuil, 34, have also been charged with
obstruction of justice for their efforts to destroy evidence
of their involvement in insider trading after reading media
reports about the FBI's investigation.
The charges are the latest in the US government's biggest
insider trading probe. So far, 13 people have been arrested
or charged in the investigation.
Barai is accused of trading on inside information about
technology companies after receiving tips from a consultant
working for expert network firm Primary Global Research.
Barai Capital was one of the hedge funds raided by US
investigators in November. It has since shut down.
Prior to starting his own fund, Barai was a portfolio
manager at Citigroup's USD 2 billion Tribeca Global
Management, which was shut in 2008.
Longueuil was arrested at his residence in New York
on Tuesday morning.
Pflaum and Freeman have pleaded guilty in Manhattan
federal court to one count each of conspiracy to commit
securities fraud and for their roles in the scheme.
Freeman was a managing director at Boston-based Sonar
Capital Management before joining SAC Capital in mid-2008.
The US has brought insider-trading charges against more
than 30 people since October 2009 as part of the probe.
A trial in the case at the centre of the investigation,
against former Galleon Group LLC co-founder Raj Rajaratnam, a
Sri Lankan, is scheduled to begin on February 28 in New York.
The complaint unsealed on Tuesday alleged hard core
insider trading in stock after stock - people blatantly
trafficking in material, non-public information.
"And the lengths to which two of these defendants went
to cover their tracks sounds like something out of a bad
movie," Manhattan US Attorney Preet Bharara said in a
statement.
According to the complaint, Barai, Longueuil, Pflaum and
Freeman participated in a conspiracy between 2006 and 2010 to
obtain inside information, including detailed financial
earnings about numerous public companies.
Although the four worked at different hedge funds, they
had regular conference calls during which they shared
information with each other.
In May 2008, Winifred Jiau, who was previously arrested
in December 2010, told Barai and Freeman over telephone about
a company's quarterly revenues, gross margins and earnings per
share.
As a result of Jiau's information, Barai and Longueuil's
hedge funds purchased shares of the company and ended up
making over a million dollars in profit.
They also made efforts to conceal the scheme from
regulatory and law enforcement agencies, including by saving
any electronic records evidencing their communications with
company insiders on external flash drives or external hard
drives, rather than on hedge fund servers.
They also used personal e-mail accounts rather than
the hedge fund e-mail accounts to communicate about inside
information.
Later when Barai and Longueuil read media reports that
the FBI and a Manhattan federal grand jury were conducting an
investigation into insider trading, the two destroyed digital
records and documents reflecting their receipt of inside
information from their sources.
Barai had told Pflaum in a November 19, 2010 BlackBerry
message to "delete ur bbm chatr," meaning BlackBerry messages
with Barai.
Pflaum answered "Yo. Deleted them" the next morning and
said he "didn't sleep so well last night."
Barai answered that he "didn't sleep much either," and
that Pflaum should "shred as much as u can" and delete
emails from two other workers at his firm, Barai Capital
Management.
"I deleted mine," Barai is said to have added.
Longueuil destroyed his flash drive plus two external
hard drives by ripping them up with two pairs of pliers,
according to the complaint.
"(P)ulled the external drives apart," Longueuil told
Freeman, according to the complaint.
"Put (them) into four separate little baggies, and then
at 2 am ... 2 am on a Friday night, I put this stuff inside my
black North Face ... jacket ... and leave the apartment and I
go on like a 20-block walk around the city ... and try to find
a, a garbage truck ... and threw the (it) in the back of like
random garbage trucks, different garbage trucks ... four
different garbage trucks."
Barai could face a maximum penalty of 20 years in
prison and a maximum fine of USD 5 million. Pflaum and Freeman
face a statutory maximum sentence of 25 years in prison.
The charges against them are part of an ongoing
government probe of insider trading by hedge funds that hire
consultants or expert networks to provide inside information
on companies, like earnings or upcoming products.