Tag Archives: hedge funds

Steve Cohen, Third Biggest Owner of Sotheby’s In 2009 (Corrected)

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Modern Art Obsession has a post from April 2009 (see below) about Steve Cohen exhibiting a collection of his art at Sotheby’s, (where he  is the third largest owner). The exhibition ran exactly at the same time as Sotheby´s Spring Modern and Contemporary Auction. The Cohen art was not for sale.

Quote:

“So.. we guess there are other ways to dump an art collection skin a cat.

Hmmm… Maybe the page from the Billionaire Art Opportunist Collector playbook could be :

  • Step 1.. Buy lots of Art, push prices way up, and tell everyone who’ll listenin the media you’re a wise long term buyer.
  • (Photo #1, Richard Prince, “Graduate Nurse, 2002”,Ink jet print and acrylic on canvas,89 in x 52 in.   FYI… A description from Sotheby’s.. “This work is one of the best paintings Prince ever made, particularly because of its monumental scale and the rich, painterly quality of the brushstrokes”)
  • Step 2.. Buy an art auction house (or a Whopping controlling interest in one),
  • Step 3.. Stage a show of the great works having auction house experts tout your collection..
  • Step 4..Tell everyone these art works, on proud display, are not for sale
  • Step 5… Wait for someone stupid enough to say.. I wish I could have a collection like the one by this well known art collector, which just happens to be on display in the auction house.
  • Step 6.. To be determined…. Hmm.. possibly.. Cash out..??

Note: Cohen’s SAC Capital amassed its position in Sotheby’s in the 6 months upto March 31, 2009, and  Sotheby’s shares doubled by June 2009 from a low in February.

Correction (January 7, 1020):  Cohen sold his stake in June:

The fund acquired its Sotheby’s stake between September and April, a period in which the auction house’s stock was battered by the financial crisis and a shrinking art market. The share price was below $10 for much of that period, down from a high of $61.40 at the end of the boom. This spring, the stock rebounded somewhat –­ it was $14.48 a share on June 30­, so SAC’s sale of its roughly four million shares was likely to have netted several million dollars

Lazard-Freres Insider Trading Bust

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I missed these arrests from back in mid-December:

“U.S. prosecutors filed criminal charges against a former Lazard Freres banker on Wednesday for alleged insider trading that earned him and others $500,000 in illegal profits.

The trading involved some of the highest profile deals during the leveraged buyout boom of 2005 to 2007, including the buyout of TXU Corp, as it was formerly known, for $44 billion, including debt.

The charges were brought against Adnan Zaman, a former vice president at Lazard Freres, in federal court in San Francisco.

Financial regulators also filed civil charges against him and Vinayak Gowrish, a former associate at private equity firm TPG Capital, saying the one-time fraternity brothers stole confidential stock tips and then passed them on to friends. In return, the men received cash kickbacks.

The U.S. Securities and Exchange Commission settled the civil case with Zaman, who agreed to return $78,456 in ill-gotten gains and to be permanently barred from associating with any financial broker or dealer.

The SEC said that Gowrish and Zaman, friends since high school, tipped two friends, Pascal Vaghar and Sameer Khoury. Vaghar and Khoury also settled with the SEC.”

More at Reuters.

My Comments

Is it just me, or does there seem to be an awfully high number of desis (Hindi for home-boy).

What´s with these guys?

As a fellow desi, I have to hang my head. World-class education, world-class jobs, better than world-class salaries…and a world-class racket.

SEC Subpoenas Former SAC Trader Grodin

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El Economista carries this Reuters report, dating from yesterday, Dec. 24, on the SEC´s subpoena of a former manager at Steven Cohen´s SAC Capital hedge-fund:

“Federal prosecutors in the Galleon Group case have sent a subpoena to a former employee of Steven A. Cohen’s SAC Capital Advisors, a sign that the scope of the problem into the largest hedge-fund insider trading case in history is expanding, the Wall Street Journal reported, citing people familiar with the matter.

The subpoena seeks trading records from a former SAC hedge fund manager, Richard Grodin, who employed a cooperating witness in the insider trading case announced last week, the Journal said.”

My Comment

It’s all getting pretty tangled, so first let me try to bring some order into the picture.

  • I blogged, via Terri Buhl, that hedge-funds are going SAC-remote, deleting their email records and changing their trading positions so they don´t look too similar to Cohen´s, in anticipation of a probe. And now here come the subpoenas.
  • The subpoena to Grodin arises out of the two-year FBI investigation of twenty hedge-funds that became public in October 2009 with the Galleon arrests.
  • The investigation is headed by FBI agent B. J. Kang.
  • Kang also led the probe into the alleged stock manipulation of Fairfax Financial in 2006, in which SAC was one of three hedge-funds involved.
  • The two traders, Richard Choo-Beng Lee, and Ali Far, have admitted that they were involved in insider trading not only at their own fund Spherix, but  going back to 1994. This makes it highly probable that they were also trading illegally at SAC, where Lee worked for about five years.
  • Specifically, the agreement Far and Lee signed with the US Attorney’s Office charges conspiracies to commit insider trading from 2007-2009, from 2004-2007, and from 1999-2004.
  • Galleon chief Raj Rajaratnam’s brother Rengan, who was investigated for insider trading at his firm Sedna, also worked for SAC in 2003.
  • Lee is also going to be testifying about any insider trading he might have done at another firm, Stratix, which was founded by former SAC trader Richard Grodin, and yet another SAC alumnus, Ian Goodman.
  • Stratix, whose investors include SAC (is your head whirling?), shut down in 2007.
  • Then Grodin began another firm, Quadrum, which also shut down (“abruptly”, says Reuters).
  • Also, in November, we had the bizarre revelations of Andrew Tong, who claims he was sodomized and forced into oral sex, cross-dressing, and the ingestion of female hormones (to make him the perfect androgynous trader) by his boss, SAC trader Ping Jiang. Investigated in 2007, the case was dismissed as lacking in substance. The records were sealed, leaving many people feeling that the SEC, as a Harvard paper recently confirmed, tends to go after smaller rather than bigger fish.
  • But in November ’09, the Tong case was opened again and given wide attention on the internet, this time with more attention to Tong’s claims that Ping Jiang forced him to into illegal trading that led to a $3 million loss. The loss was the reason SAC gave for Tong’s firing. But Tong himself claims that that was just an excuse and that the sexual harassment was the real reason. He also claims that Cohen knew what was going on and didn’t care, as long as money was being made. In keeping with the firm’s reputation for secrecy, Cohen made everyone sign confidentiality agreements and kept even top officers in the company out of the loop.
  • These revelations have been followed by new charges made by Cohen´s ex-wife Patricia that her husband had cheated her out of money in their divorce settlement. Some of that money, she now claims, was hidden from the government and came from illegal insider-trading by  Cohen was he was a young trader in the 1980s at Gruntal & Co., a shady brokerage with a history of embezzlement and scandal.

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NOTE:

**If you want to understand the modus operandi of one of these insider trading deals, read Deep Capture´s latest analysis. It displays some of the emails sent by certain hedge-funds that colluded with SAC in the manipulation of the stocks of Fairfax Financial, Jim Chanos´Kynikos and Third Point among them.

The Fairfax investigation (opened in 2006) petered out, but Deep Capture’s email collection nixes any chance that the record can be wiped clean by any of the funds involved (you can also see Bagley´s piece posted at Seeking Alpha).

Den Of Thieves: Hedge-Hogs Go Into SAC-Remote Mode

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Update: Deep Capture indicates that they have some emails proving insider trading, so any attempts to delete files/emails by SAC and other firms might not be any good, since  the files just happen to implicate said firms in…insider trading.

Ah, the web we weave…etc. etc.

Terry Buhl at Hedge Fund-Implode.com reports that residents of hedgefund land are going into SAC-remote mode:

“Funds like Blue Ridge, Greenlight, Third Point, Glenview, and Maverick are cutting back on any contact with King Stevie. When we asked major players such as Jim Chanos and others if they’ve been pinging Stevie about a trade lately, you’ll get a very defensive `no.’ Why? Because word on the street is they all think FBI special agent BJ Kang, who is now dogging Stevie, has the goods to deliver the hammer soon in the form of  an indictment or arrest for insider trading.

Extra measures are being taken to hire data-miners to comb through any and all emails firms and their trading consultants ever sent to anyone at SAC in an attempt to erase them from internet memory. According to traders we talked with, they are even going as far as getting out of trades that might look similar to any of Stevie’s. So it looks like running due diligence on your `SAC risk’ to prove to your investors that you’re clean – like Larry Robbins of Glenview capital just did – is the new `killing it’.”

My Comment:

Just to recap.

*Steven Cohen is the multibillionaire chief of legendary hedge-fund SAC, which sits at the top of the heap among funds. Cohen, famously reclusive, is said to have had only one bad year of trading.

Now he´s having a bad time from the  FBI investigation of the insider-trading case against New York-based hedge-fund Galleon Group, which is proving to have teeth in it.

SAC has a history of elbows-and-knees-style trading practices, according to this 2003 Business Week article.

*The head of Galleon (which once managed $7 billion in assets), Sri Lanka-born Raj Rajaratnam was arrested, along with five others, on October 16  in a $17 million dollar insider-trading case brought by federal prosecutors and the FBI.

(The numbers vary: it´s $20.8 million, according to a later WSJ report, and $25 million in a NY Daily report)

*The case was unusual in that FBI agent B. J. Kang used wire-tapping for the investigation (normally used only in drug-related cases).

*The Galleon arrests were quickly followed by other arrests of  traders, lawyers and hedge-fund managers on November 5, including one Zvi Goffer, who, as the brains of the insider network, was referred to as “the octopussy.” This brought the total number of arrests in the case to 14 (Correction on 12/29: I read 20 elsewhere) and added another $20 million to the fraud, already the biggest in Wall Street history since the days of Ivan Boeksy in the 1980s.

*On December 16, Steven Cohen´s ex-wife Patricia accused him of hiding millions from her and of insider trading in a 1986 merger when Cohen was a young trader at now-defunct broker, Gruntal.

*Indicted on December 17 (December 15, according to one source) by a Federal grand jury  on multiple criminal counts of insider trading and securities fraud,  Rajaratnam  pleaded not guilty. Many of the charges against him carry upto 20 year prison sentences. The trial is expected to take place in the summer of 2010.

*The broker Gruntal has an interesting history, in that it seems to be the place where several of the biggest names on Wall Street (aka some of the most crooked players) crossed paths:

Bernie Madoff, Ezra Merkel (Madoff fund associate), Ivan Boesky (infamous 1980s trader), Michael Milken (junk bond innovator), Carl Icahn (famed and feared corporate raider), Steven Feinberg, ,…and yes, Steven Cohen:

From Deep Capture:

“Another of Madoff’s most important “feeders” was J. Ezra Merkin, who managed the Ariel Fund, which seems to have been designed specifically to raise money for Madoff’s fraudulent investment business. In this regard, the New York attorney general has described “Merkin’s deceit, recklessness, and breaches of fiduciary duty…”

While Merkin was “deceitfully” feeding the Madoff Ponzi, he was also a co-owner, along with Steve Feinberg, of Cerberus Capital Management, a fund named after the mythological three-headed dog that guards the gates of Hell.

Previously, Feinberg was a top trader for Michael Milken at Drexel Burnham Lambert. After Drexel, Mr. Feinberg moved (on Milken’s recommendation) to a brokerage called Gruntal & Company.”

Gruntal owed its existence to the generous junk bond finance that its parent company, the Home Group, received from Michael Milken. Its options department was founded by Carl Icahn, who later became a “prominent” billionaire owing to the junk bond finance that he received from Michael Milken.

When Icahn left Gruntal, he was replaced by a Milken crony named Ron Aizer, who proceeded, on the recommendation of Milken, to hire two traders.

The first trader hired by Aizer was, according to a reliable source, investigated by the SEC for trading on inside information that he received from Milken’s operation at Drexel Burnham Lambert. This trader is now a “prominent” billionaire and the manager of a well-known hedge fund. The second trader hired by Aizer is now also a “prominent” hedge fund manager, though he is not quite a billionaire. Both of these traders play important roles in the story of Dendreon. Carl Icahn, the founder of Gruntal’s options department, has a cameo role, too.”

There is more, of course, much more to the story, and many more names, including Michael Steinhardt, Marc Rich who was pardoned by Clinton for tax evasion and dealing with Iran against US law, and many others, but that would make this post far too long, so I will send you instead  to this page.…and this...for now.

(Of course, we could ask why hedge-funds with an edge get to be prosecuted, while governments with the biggest edge of all don´t  – but there, we won´t spoil the fun).

Sad SAC: Reuters Spikes Hedge Story On Complaints From Steve Cohen

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Via Finalternatives:

“Reuters opted against running a story about alleged insider-trading on the part of SAC Capital Advisors founder Steven Cohen after Cohen himself complained about the news agency’s coverage, a journalism blog reports.

Cohen repeatedly called Devin Wenig, CEO of Thompson Reuters Markets Division and the second-in-command at Reuters parent Thomson Reuters, according to Talking Biz News. The hedge fund boss reportedly complained that the story, which the University of North Carolina blog reports would have been an “incremental” advance in the story of alleged insider-trading more than 20 years ago, was part of a pattern of persecution on the part of Reuters.

Wenig forwarded Cohen’s complaints to Reuters editor-in-chief David Schlesinger, who in turn referred the story to editors. Those editors debated the story, written by Matthew Goldstein, before deciding to kill it after three days.

“We make decisions on whether or not to run stories purely on journalistic grounds,” a Reuters spokesman told Talking Biz News.

Goldstein was the first reporter to cite the unsealed court documents that include explosive allegations against SAC and former SAC portfolio manager Ping Jiang. Cohen’s ex-wife, Patricia, last week sued him for $300 million, accusing him of insider-trading, perjury and hiding assets from her and from the authorities.”

My Comment

Looks like more confirmation of the Deep Capture thesis – that major newspapers are bending over backwards…and forwards….for the big hedge funds.

I notice that Hedge World has picked this story up….as well it should, it’s a big one… and very kindly links this blog, as well as the ever-alert zerohedge – the only MSM-touted blog I truly dig, mainly because I dig the characters on it.

Earlier, I blogged that Steven Cohen was also having problems with a militant ex-missus, who has gone public with allegations that he perjured himself, hid money from the government (here we are on Stevie’s side), and did other sorts of naughty things, like insider trading, that reclusive billionaires really shouldn’t do, not if they want to stay either reclusive or billionaires.

We have much more sympathy for Mr. Cohen, of course, than we do for the self-important twits and petty tyrants who fly their bylines at major newspapers with little respect for the body politic. At least, we understand simple greed. But the weedy vanity of the pen-pushing mob needs to be exposed for what it is. 

Now comes Mr. Goldstein, who clearly suffers from the delusion that his job is to break important stories, no matter how exalted the net worth of the subjects. That didn’t sit well with his boss, and now the dirty laundry is out in the open.

Meanwhile, as if irate Sith ladies and spiked stories weren’t enough, there’s also a forced oral sex- cross-dressing- cum- sexual-harassment suit coming back from the past to haunt Sad SAC.

Who knew you could have so much fun without getting naked (shorted)?

Billionaire Nabbed In Largest Hedge Insider Scheme

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In the news (:http://www.bloomberg.com/apps/news?pid=20601087&sid=asliefsvW5Zc)

“Oct. 16 (Bloomberg) — Raj Rajaratnam, the billionaire founder of Galleon Group, and ex-directors at a Bear Stearns Cos. hedge fund were among six people charged in a $20 million insider trading scheme federal prosecutors called the biggest ever involving hedge funds.

Also accused were Rajiv Goel, who worked at Intel Capital as a director in strategic investments, Anil Kumar, who worked as a director at McKinsey & Co., and IBM Corp. executive Robert Moffat. The former officials at Bear Stearns Asset Management are Danielle Chiesi and Mark Kurland, who were affiliated with the firm’s New Castle Partners, which managed about $1 billion.

“The defendants operated in a world of, you scratch my back, I’ll scratch your back,” U.S. Attorney Preet Bharara in Manhattan said at a press conference today. “Greed, sometimes, is not good.”

My Comment

The biggest hedge scam – there you go. Anything Westerners can do, Easterners can do better. We’re not going to settle for any penny-ante crime anymore.  Now you know how at least one South Asian billionaire got rich so fast. Nothing like having an edge…

What’s interesting is that this is the first time that the Fed’s used wire-tapping to target insider trading on Wall Street. Until now that tool has been the reserve of organized crime and drug cases.

Are Speculators to Blame for Soaring Oil Prices?

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Mike Martin has a piece on speculation at Huffington Post today arguing that the movement of oil prices is just the result of supply and demand and that speculators are taking the rap unfairly.

Read the Article at HuffingtonPost

This was my comment:

Good piece.. We all speculate, to different degrees, and over different time frames. Some of us do it consciously, others do it more unconsciously.

I think it’s fair to say that speculation in certain things – food and land, for starters – has social consequences we shouldn’t brush aside. But as long as money is not being priced correctly (the interest rate is held artificially low), people have an incentive to get a better return.

The underlying problem is created by the government….

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