Wall Street Insider Trading Probe

Samir Barai’s hedge fund is among the first casualties of a vast insider-trading ring

Three days ago, The Wall Street Journal reported that a manager of Barai Capital Management, a $80m hedge fund, found his fund raided by FBI agents in November. Samir Barai, an ex-employee of Citigroup, decided to shut down his fund. It was among the first casualties of a vast insider-trading ring uncovered by authorities late last year.

At the centre of the probe is the firm Primary Global Research. This comprises of a network of consultant experts who are alleged to have shared information not in the public domain with hedge funds. The Journal reported that Barai made over $820,000 in two months in 2008 based on information provided by a PGR analyst. So far, the paper said, the government has pressed criminal charges against eight people employed or contracted by PGR.

An expert-networking firm, Primary Global Research, is alleged to have paid employees of companies for confidential information on their products and clients.
PGR’s role was uncovered during an investigation of the Galleon Group. The group’s founder, Raj Rajaratnam, was charged with fraud in what was described as ‘the biggest insider trading scheme ever involving a hedge fund’ in 2009. In late November 2010, Don Chu, an executive with PGR, was arrested for providing ‘market intelligence to hedge funds and other money management outfits’ (The New York Times). Bail was set at $1 million. Many hedge funds were clients of the expert networking firm, and the US government said that the funds were provided with tips on technology companies. This was made possible by PGR, which put its paid consultants in touch with hedge funds. One consultant, arrested in December, said he was paid over $140,000 for insider information.

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