The WSJ is reporting the FBI raided the Connecticut offices of two hedge funds amid insider-trading case.

Marketwatch reports that the firms — Diamondback Capital Management and Level Global Investors — were spinoffs from SAC capital.

This which leads to the obvious question: Is the SEC chasing the big dog (Stevie Cohen), or was this merely a coincidence . . .?


What say ye?

Category: Hedge Funds, Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

38 Responses to “Open Thread: FBI, SEC Gunning for SAC ?”

  1. [...] Barry Ritholtz asks the question on everyone's mind: Is it the Big Guy (Steve Cohen) who they're actually after?  (TBP) [...]

  2. curbyourrisk says:

    Please direct your attention to 200 West Street, New York, NY.

  3. WFTA says:

    They then go on to conflate that “…FBI raids add to market jitters.”

    Can they never leave it that, “some schmoes wanted to sell with greater urgency than some other schmoes wanted to buy?”

  4. Bob is still unemployed   says:

    It looks like it may be three firms now.

  5. Darkness says:

    I had to check the calendar to make sure it wasn’t April 1st.

  6. Sechel says:

    I don’t mean to sound overly jaded but I’ve come to believe that investors pay up for funds that benefit from “inside information”. Deep down how many of us think that one can constantly outperform an index based on hard work and research. It’s a competitive market and long term the best most of us can hope for are index type returns.

  7. DeDude says:

    First they take the small dog, who under pressure of having to spend 20 years in jail as somebody’s bi… decides to talk – so they can take down the big dog.

  8. dead hobo says:

    I hope you’re wrong. This sort of thing could damage the reputation of Wall Street. Even just talking about could put jobs in jeopardy.

  9. b_thunder says:

    imagine the money outflow from Wall St. if the Feds parade The Big Guy in handcuffs….
    What if they line up 20 of them? That would basically prove that everyone is “doing it”, that securities fraud is the one and only game on Wall St. The “retail investor” will never trust Wall St again.

    So, for the sake of the market, for the sake of 401(k) plans, for the sake of successful asset pump by QE2 – let’s not indict anyone, let’s not leak anything to the press – let’s “extend and pretend” this affair… indefinitely… like we did with the zombie mega-banks. All for the sake of hard working people’s 401(k) plans of course….

    P.S. Has anyone heard if a certain “charitable fund” run by some “J. Cramer” is under investigation too?

  10. curbyourrisk says:

    Fire them all…..then throw them in jail.

  11. rip says:

    Someone will pay the plutocrats the right honor ($), and the perps will walk.

    Money talks.

    Little guys fund the judicial system. DUI. Drugs. Hard ass tough on crime DAs get it done.

    To the elite’s satisfaction.

  12. emailcraigs says:

    No, no, no….what is the FBI thinking? They can’t go after these guys. It will only lead to the tax payer footing the bill for yet another historical bailout as soon as the TOP hedge funds claim too big to fail. LOL. And who are we going to look up to when we find out that all of our HEROES have actually been making money through a rigged system and not from their BOLD aggressive intellects. Besides that…this could lead to a severe depression in luxury item purchases and services. Can you imagine what the rich will be like when they have to forgo their private jet jaunts to Aspen and the like? Heck, congress will have to pass a special bill exempting them from TSA grope sessions or they might “move overseas”. ROFLMAO. Cats and dogs living together….mass hysteria!!!

  13. Tarkus says:

    Weren’t there some big political fundraisers up there in Conn before elections?

    Doesn’t money buy anything anymore?!

  14. Lyle says:

    Re B_Thunders comment. I just saw a segment on CNBC where concern was raised about small investors avoiding the market because they think its rigged. I suspect that the view of the market could not get much worse if it tried to do so. It happens every time after a big crash, it took into the mid 1950s for the small non-rich investor to get back into the market. Things like the flash crash make it hard to make things any worse.

  15. mbelardes says:

    If you haven’t already put in open orders for puts on the firms implicated, you are missing The Big Picture.

    If the FBI is raiding offices, that means they have warrants. That means they talked to a judge and were particular about what they are looking for. The overarching story was already in the WSJ. As cynical as I’ve been about the SEC, I do not think the FBI and the DOJ are messing around and they definitely don’t give two craps about pissing off anyone on Wall Street. Any Federal Prosecutor that takes down multiple hedge funds in an insider trading ring and a few fat cats on Wall Street, let alone a whole firm, pretty much cements their next gig as a US Senator or Governor and at the very least as a partner to a defense firm, making bank.

    These cases take time to build. Remember the “I” in FBI stands for “Investigations” so clearly someone is building a Federal Criminal Case and I doubt they are pointing the gun at some low level hedge fund stooges.

  16. Sechel says:

    The absurdity is that in many situations it is the corporation(read shareholders) that pay for the legal defense and associated fines.

  17. Adult Franklin411 says:

    “Any Federal Prosecutor that takes down multiple hedge funds in an insider trading ring and a few fat cats on Wall Street, let alone a whole firm, pretty much cements their next gig as a US Senator or Governor…”

    Get elected Senator and in come the insider tips. It’s more like ancient Rome than anything else.

  18. Mannwich says:

    @mbelardes: Only “Senator” or “Governor”? I’d venture to guess that a much higher office could well be in store if what you say happens.

  19. mediaglyphic says:

    The feds want Steve Cohen real bad, and it looks like they are getting close. I think a few others will also go down. You do know Rengan Rajratnam worked at Sac for a while.

  20. ewmayer says:

    @mbelardes: Much as I hope you are right (and even more, hope that the trail leads to some of the TBTFs who’ve routinely been having those “eyepopping” 0,1, and 2-trading-loss-day quarters), I’ll believe it when some big names actually start doing time.

    Based on on the current state of affairs, i.e. “biggest financial crisis and underlying fraud in history, and 0 convictions of major actors to date” (Madoff doesn’t count … that simply came to light as a result of the increased scrutiny that followed the bust), I ain’t holding my breath.

    Again, I hope to be proven wrong in my abiding cynicism on this matter.

  21. Roger Bigod says:

    There was an article on Cohen in Vanity Fair a while back. It mentioned the Galleon connection. Also, that some of his people had been very inquisitive around town about um background information on publicly traded equities. Cohen was upfront the he knew there were some rumors.

    OTOH, he had a terrific track record from the beginning, and the interview showed him phenomenally concentrated on his screens. He now has a huge organization, so some underlings could be getting insider info without his knowing about it.

    You could take it either way.

  22. Petey Wheatstraw says:

    “Is the SEC chasing the big dog . . ?”

    Well, being that Wall St. has more big dogs than the SPCA after the Michael Vick raid, I guess chasing “a” big dog might be more accurate. Trapping a big rat even more so.

    mbelardes is right about the warrants. No time to destroy docs, either.

    Maybe the ripple effect will result in a tidal wave of indictments, but I’m just a wee bit cynical.

  23. ToNYC says:

    Throw red meat to the hounds and watch them go for it. The SEC managed to get the conversation away from the bank fraud by intent. Machiavelli never fails. Let’s see how long this canard flies.

  24. hammerandtong2001 says:

    Have observed these “research network” firms up close and personal. Know them well.

    Actually, I can readily see the value in paying a pro $700/hr to pontificate on the details about why a certain product could be very important in category “X”, etc.

    But the potential for abuse is obviously there and can readily see how this otherwise “valuable service” could be re-jiggered into a pay-to-play game with inside info being traded for lucre. It’s completely unregulated, barely managed, and an open invitation for you-know-what.


  25. Andy T says:

    Does it really matter much?

  26. louis says:

    Madison wanted us to be the watchdogs, we have failed. This is purely window dressing for the inside. Here’s your cell phone Mr. Gecko.

  27. tankthomas says:

    There is no doubt that they are after Steve Cohen. It all started with his first wife and what she’s been saying. I found this piece informative: Wallstreetbeast

  28. lalaland says:

    Man, that’s the strangest consistent login method yet. Click login, go to page where firefox has remembered the pass but not the id, double click the id box and the id flashes but doesn’t appear! It looks like nothing has happened but says I’m logged in. Click back button but not yet – refresh – and now I’m logged in.

    Anyway, I sure hope the SEC is going to use ‘death by 1000 cuts’ rather than ‘if you cut off the head of the snake, etc.’ logic here.

  29. mitchcalderwood says:

    Saw a cartoon on the Irish Times website

    eeeEUuuuuu IMF*^ked

  30. wunsacon says:

    Barry, you once banned (or threatened to ban) a reader for suggesting SAC was doing some unsavory things. We’ll never know. But, it certainly made me wonder.

  31. Cassandra Does Tokyo says:

    There just possibly might be a reason why SAC has the distinction of being notious for frequently paying the highest commissions on the street, during an epoch when when explicit commissions have generally tended towards zero – even negative if one is supplying liquidity. So when is a commission not a commission? When is a commission a profit share for first call on material non-public information? Hmmmm, worth pondering. Advice to SEC: Follow the money, and ye always will be rewarded. It is also perhaps worth exploring the question (again) whether brokers with potential information have exploited the profit-sharing route as a conduit for extracting higher rents on time-sensitive or market-moving information that their compliance officers, outside counsel, and common sense deems too risky to exploit in house, but which has immense value. Caveat: One would have thought that anyone operating as such would have had the foresight to NOT directly link outsized commissions to advantaged trades. Yet, greed often blinds. Advice to SAC: ummm errrrr …. pray hard!

  32. ToNYC says:

    Smarter monkeys are getting faster information since before words and the European industrialists time. Rather than deal with this black letter fraud by the bank monopoly, they will try proving if spooning always leads to sex at the field hands in higher cotton. Misdirection at its finest..or how we got here?

  33. not-affiliated-with-Wall Street says:

    I want to believe this is real, but I just can’t help wondering if this is a bit of theater to deflect public hatred from the banks/government cabal. I’m thinking of the Lily Tomlin quote in the previous post: “No matter how cynical you get, it’s impossible to keep up.”

  34. “…Rather than deal with this black letter fraud by the bank monopoly…”–ToNYC, above


    good point. additionally..
    Insider Trading: Criminal Charges, Fines Against Large Number of Wall Street Executives and Investors
    November 22nd, 2010

    Upstarts get busted in an attempt to maintain appearances while public menaces Goldman Sachs and AIG are allowed to slip from the headlines.


    Insider Crimes, Funny Money and Options Rackets

    They Made a Killing: The Use of Knowledge of Covert Operations in the Stock Market

    They Made a Killing: The Use of Knowledge of Covert Operations in the Stock Market
    October 30th, 2008
    Related: Exposed: The Carlyle Group (Torrents available)

  35. ZackAttack says:

    A corrupt government taking down a host of worthless rentiers. One can only pray for a tragic collapse of the courtroom that kills all parties involved.

    False flag, to take your eyes off securitization fraud.

  36. jcmcn5 says:

    Oh please. Don’t any of you remember Boesky? Friedman (Freedman?), and a host of other “big dogs” paraded out if cuffs by then Prosecutor Rudy? This is mere theater as far as the market is concerned. If the market goes down from here, it has nothing to do with this.

  37. “…SUMMARY: EPA will authorize its contractor, Industrial Economics,
    Incorporated (IEc) to access Confidential Business Information (CBI)
    which has been submitted to EPA under the authority of all sections of
    the Resource Conservation and Recovery Act (RCRA) of 1976, as amended.
    EPA has issued regulations that outline business confidentiality
    provisions for the Agency and require all EPA Offices that receive
    information designated by the submitter as CBI to abide by these

    as, but, one ex.

  38. [...] noted yesterday, Stevie Cohen is a target of t6he FBI/SEC [...]