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Katya Wachtel
2010-11-22T19:20:57Z
What was a insider trading case against Dr. Yves Benhamou and FrontPoint Partners has morphed into the biggest insider trading investigation in history.
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Hard to get more shocking than that.
Now here's 11 more insider trading scandals that shocked the world.
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1986: Ivan Boesky, Dennis Levine and the fall of Drexel Burnham Lambert
The scandal involving i-banker Dennis Levine of Drexel Burnham Lambert (DBL) and arbitrage king Ivan Boesky, brought down several Wall Street titans and DBL - arguably the "richest and most feared firm on Wall Street." Boesky earned $50 million in profits from the tips; Levine's "biggest insider trade" earned him a profit of $2.69 million. It was because "Boesky hit home runs on nearly every major deal in the 1980s - Getty Oil, Nabisco, Gulf Oil, Chevron, Texaco" that the SEC realized something was up.
Source: New York Magazine
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2001: Martha Stewart and ImClone
In 2001, America's sweetheart, Martha Stewart, sold $228,000 worth of ImClone biotech stock the day after her friend and founder of ImClone, Sam Waksal, sold his shares and told his family to sell out too based on insider information. In '04, Stewart was found guilty of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators. She went to prison for five months.
Source: New York Magazine
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2001: Art Samberg's Illegal Microsoft Trades
Former Pequot Capital CEO Art Samberg blatantly asked Microsoft employee David Zilkha for insider information about the tech company in several emails during 2001, which then helped net his hedge fund $2.1 million. Samberg settled and paid the SEC $28 million. Pequot, once one of the most famous hedge funds on the Street, was forced to close its doors by mid-2009.
Source: TBI
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2001: Rene Rivkin Convicted For Insider Trading That Netted Him Only $346
Australia's most famous banker, Rene Rivikin, was convicted of using confidential, market-sensitive information to earn just $346 on 50,000 Qantas shares he bought in '01 within hours of learning Qantas would merge with Impulse airlines. Rivkin was found guilty in '04, banned from stockbroking for life, sentenced to 9 months jail, all for less than a $400 bonus. He committed suicide in '05.
Source: The Sydney Morning Herald
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2005: Joseph Nacchio and Qwest Communications
Former Qwest Communications chief Joseph Nacchio was charged with 42 counts of insider trading linked to him dumping more than $50 million in stock in 2005 (he was convicted in '07 on 19 of those charges), acting on non-public information that the company was in decline.
Source: The Washington Post
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2006: Livedoor and Murakami, The Enron Of Japan
Yoshiaki Murakami's hedge fund bought 1.93 million shares in Nippon Broadcasting after he was told that internet and financial services company, Livedoor, was attempting to gain a 5% stake in the broadcaster. Murakami was arrested in '06 for acting on non-public information that earned him $25.5 million. The wider Livedoor scandal rocked the Japanese economy; the Nikkei tumbled, the stockmarket lost 6% over 2 days, with Livedoor's value plummeting 52% over 5 days.
Source: WSJ and Time
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2007: Mitchel Guttenberg, David Tavdy and Erik Franklin
A $15 million scam and the biggest insider trading scandal since Boesky-gate, was allegedly hatched at the Grand Central Oyster Bar. Mitchel Guttenberg, an executive director at UBS, tipped off hedge funds and traders about forthcoming analyst upgrades and downgrades on stocks including Allstate and CVS. David Tavdy and Erik Franklin paid hundreds of thousands of dollars for the tips, earning $4 million from the resulting trades.
Source: New York Post
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2007: Randi and Christopher Collotta
Randi Collotta, a former compliance officer for Morgan Stanley, divulged non-public information about four M&A deals to her husband and a Floridian trader, who then passed the information to portfolio managers at a Bear Stearns hedge fund (who incidentally, were also trading illegally on Guttenberg tips). The Collotta's earned $9,000 for their tips, which helped make others $600,000.
Source: MSNBC
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2009: The Galleon Mess
Billionaire hedge-fund manager and founder of the Galleon Group, Raj Rajaratnam, as well as 19 others used secret information about public companies to make investments that earned them $60 million in profits. The giant scam involved IBM, McKinsey, Bear Stearns, Goldman Sachs, Google, Berkshire Hathaway and a bunch of traders, lawyers and executives.
Source: Time
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2010: Some Very Wily Brothers - Charles and Sam Wyly And An Alleged $550 M Scheme
The SEC alleges Dallas billionaire brothers, Sam and Charles Wyly, made $31.7 from making bets on Sterling Software which they partially own, that was “massive and bullish” in 1999 after deciding to sell the company. The brothers are also charged with securities fraud for an alleged 13-year scheme that earned them over $550 million by trading in securities of companies on whose boards they served.
Sources: TBI, SEC
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2010: Insider Trading By French Doc Might Have Helped FrontPoint Avoid Huge Losses
Alleged insider trading by a Dr. Yves Benhamou may have allowed FrontPoint's healthcare funds - overseen by Chip Skowron - to avoid $30 M in losses. Benhamou is accused of tipping off FrontPoint when trials for a potential hepatitis drug were unsuccessful (Benhamou worked for HGSI, which makes the drug). The funds then sold 6 million HGSI shares on key dates before negative trial results were announced.
Source: TBI
If you think these guys made some bad choices, check out...
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As an expert in financial markets and insider trading, I can shed light on the intricate details of the cases mentioned in the provided article. My depth of knowledge extends beyond mere awareness of these scandals; I can analyze the historical context, legal implications, and the impact on the financial industry. Let's delve into each case mentioned:
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1986: Ivan Boesky, Dennis Levine, and Drexel Burnham Lambert
- Ivan Boesky, an arbitrage king, and Dennis Levine, an investment banker at Drexel Burnham Lambert, were involved in an insider trading scandal.
- Boesky profited from tips related to major deals in the 1980s, leading to the downfall of Wall Street titans and Drexel Burnham Lambert.
-
2001: Martha Stewart and ImClone
- Martha Stewart, a prominent businesswoman, sold ImClone biotech stock based on insider information from Sam Waksal, ImClone's founder.
- Stewart was found guilty of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators.
-
2001: Art Samberg's Illegal Microsoft Trades
- Art Samberg, former Pequot Capital CEO, obtained insider information about Microsoft from an employee and used it for illegal trades.
- Samberg settled with the SEC by paying $28 million, and Pequot Capital was forced to close.
-
2001: Rene Rivkin Convicted For Insider Trading
- Rene Rivkin, a prominent Australian banker, was convicted of using confidential information to earn a minimal profit on Qantas shares.
- Rivkin faced a life ban from stockbroking, a 9-month jail sentence, and ultimately committed suicide.
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2005: Joseph Nacchio and Qwest Communications
- Joseph Nacchio, former Qwest Communications chief, faced insider trading charges for selling stock based on non-public information about the company's decline.
-
2006: Livedoor and Murakami, The Enron Of Japan
- Yoshiaki Murakami's hedge fund profited from insider information about Livedoor's attempt to gain a stake in Nippon Broadcasting.
- The Livedoor scandal had a significant impact on the Japanese economy.
-
2007: Mitchel Guttenberg, David Tavdy, and Erik Franklin
- Mitchel Guttenberg, an executive director at UBS, allegedly tipped off hedge funds about forthcoming analyst upgrades and downgrades.
- Tavdy and Franklin paid for the tips, resulting in a $15 million insider trading scandal.
-
2007: Randi and Christopher Collotta
- Randi Collotta, a former compliance officer for Morgan Stanley, disclosed non-public information about M&A deals to her husband and a trader.
- The Collottas earned $9,000 for their tips, contributing to a larger illegal trading network.
-
2009: The Galleon Mess
- Raj Rajaratnam, founder of the Galleon Group, and 19 others used secret information about public companies for profitable investments.
- The scandal involved several major companies and individuals, leading to $60 million in profits.
-
2010: Some Very Wily Brothers - Charles and Sam Wyly
- Sam and Charles Wyly, Dallas billionaire brothers, were charged with securities fraud for an alleged 13-year scheme that earned them over $550 million.
- The scheme involved trading in securities of companies on whose boards they served.
-
2010: Insider Trading By French Doc Might Have Helped FrontPoint Avoid Huge Losses
- Dr. Yves Benhamou was accused of insider trading that may have allowed FrontPoint's healthcare funds to avoid significant losses.
- Benhamou allegedly tipped off FrontPoint about unsuccessful trials for a potential hepatitis drug.
These cases highlight the pervasive issue of insider trading and its consequences on individuals, companies, and the financial markets. Each scandal has its unique circ*mstances, but collectively they underscore the importance of maintaining integrity and ethical behavior in financial transactions.