Seven people were charged Wednesday in U.S. District Court in New York with securities fraud and conspiracy as part of a five-year federal investigation of insider trading at hedge funds.
Prosecutors said the alleged scheme, which involved trades in Dell, netted $61.8 million in illegal profits. Among those charged are Level Global Investors co-founder Anthony Chiasson, who along with three other suspects was taken into custody Wednesday, according to two people familiar with the matter.
Todd Newman, a former portfolio manager at Diamondback Capital Management, was arrested in the Boston area by the FBI, and Jon Horvath, analyst at S.A.C. Capital Advisors affiliate Sigma Capital Management, was detained in New York, according to one of the people, who asked not to be identified because they weren't authorized to speak publicly. Mr. Chiasson turned himself in, the second person said.
Also charged was hedge fund analyst Danny Kuo, who was arrested in Southern California.
Spyridon “Sam” Adondakis, Jesse Tortora and Sandeep Goyal pleaded guilty Wednesday and are cooperating with the probe, according to a person familiar with their cases.
Mr. Goyal, a former junior technology analyst at Neuberger Berman, admitted to passing material non-public information to a hedge fund, according to Alexander Samuelson, a company spokesman. Mr. Goyal left the firm this month.
Justine Harris, a lawyer for Mr. Adondakis; Gregory Morvillo, who represents Mr. Chiasson; Jessica Margolis, who represents Mr. Goyal; Alfred Pavlis, who represents Mr. Newman; and Ralph Caccia, who represents Mr. Tortora, didn't immediately return phone messages seeking comment. Steven Peikin, who represents Mr. Horvath, declined to comment. A lawyer for Mr. Kuo couldn't be immediately determined.
Manhattan U.S. Attorney Preet Bharara said Wednesday at a news conference in New York that the defendants formed a “criminal club” that reaped almost as much in illegal profits as the central figure of the nationwide probe of hedge funds, technology companies and so-called expert networking firms.
The five-year insider-trading probe has resulted in charges against at least 56 people. More than 50 have pleaded guilty or been convicted after trial since 2009, including Galleon Group LLC co-founder Raj Rajaratnam, who was found guilty in May and is serving 11 years in prison, the longest ever for insider trading. The U.S. said he earned $72 million in illegal gains.
From 2008 to 2009, Messrs. Horvath, Kuo, Tortora and Adondakis exchanged inside information about publicly traded technology companies, prosecutors said. According to the allegations, an unnamed Dell insider passed inside financial information to Mr. Goyal, who in turn tipped Mr. Tortora. Mr. Tortora shared the information with Messrs. Horvath, Kuo and Adondakis, according to a criminal complaint by FBI Special Agent David Makol.
Mr. Chiasson was tipped about Dell by Mr. Adondakis, according to Mr. Makol. Mr. Chiasson and others at the hedge fund allegedly traded on the tips for $57 million in illegal profits.
Mr. Goyal worked for Dell at its corporate headquarters in Round Rock, Texas, from 2003 until the summer of 2006, prosecutors said.