Former SAC Capital Advisors junior portfolio managers Noah Freeman and Donald Longueuil were charged with insider trading while working at the $12 billion hedge fund, part of the latest round of charges in a nationwide crackdown on insider trading by federal prosecutors.
Mr. Longueuil was charged in U.S. District Court in New York on Tuesday with conspiracy to commit securities and wire fraud, according to court filings and a joint news release from the FBI and U.S. Attorney Preet Bharara.
The violations allegedly occurred while Mr. Longueuil worked at CR Intrinsic, a unit of SAC Capital, from June 2008 through June 2010, according to a source with knowledge of the situation who insisted on anonymity.
Mr. Freeman worked at SAC Capital from June 2008 until January 2010, according to the source. He pleaded guilty Monday to conspiracy to commit securities fraud¸ according to court documents. His plea was part of a cooperation agreement with prosecutors.
”We are outraged by the alleged actions of two former employees, which required active circumvention of our compliance policies and are egregious violations of our ethical standards,” said Jonathan Gasthalter, SAC Capital spokesman, in an e-mailed response to a request for comment.
“The government alleges that their improper conduct together began at their prior firms in 2006 and continued after they joined SAC in mid-2008. They were employed at SAC for a short time and were dismissed in January 2010 and June 2010, respectively, due to poor performance. SAC is continuing to cooperate with the government’s investigation,” Mr. Gasthalter added.
Two other hedge fund managers charged by federal prosecutors in New York City were Samir Barai, the founder of Barai Capital Management, who surrendered to authorities Tuesday morning, and Jason Pflaum, who worked for Barai and pleaded guilty Monday as part of a cooperation deal.
“They took the concept of social networking and turned it into a criminal enterprise,” Mr. Bharara said at a news conference Tuesday.
The arrests in what prosecutors called a four-year scheme signal an expansion of a 16-month investigation on insider trading on Wall Street that Mr. Bharara said is “rampant.” The criminal complaint refers to six hedge funds, which it doesn’t name, that employed the defendants or executed trades.
The charges are connected to earlier arrests of eight employees or consultants at Primary Global, a firm that links investors with employees of public companies who work as consultants. Mr. Barai got inside tips from Primary Global consultants Anthony Longoria and Winifred Jiau, both of whom were previously charged, Tuesday’s complaint says.
The SEC on Tuesday also filed a related civil suit, accusing the Messrs. Freeman, Longueuil, Barai and Pflaum of earning more than $30 million from insider trades of companies including Advanced Micro Devices, Marvell Technology Group, Seagate Technology, Western Digital and Fairchild Semiconductor International.
Christine Williamson contributed to this story.