The SEC says the Vampire Squid created and sold securities designed to fail, which were then shorted.
“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party” said SEC Enforcement Director Robert Khuzami.
While I’m cheered that SEC has awoken from its slumber, this is a civil case. One hopes they will cut to the chase and starting filing criminal charges against investment bank parasites who are currently looting the country.
As predicted, the Galleon insider trading case is metastasizing, spreading everywhere. My prediction. This will be bigger than Madoff, maybe even bigger than Enron.
If Galleon’s bankers were giving the firm extra info on other bank clients, then that sounds like frontrunning, a serious violation, and a serious reason not to have those banks as your prime brokerage, if you’re a hedge fund. If those banks were giving Galleon private info on the company, that’s also bad.
During the collapse of AIG, their credit default swap unit was negotiating with banks who had bought $62 billion in CDS and CDOs from them. AIG wanted the banks to accept discounts of up to 40%. Instead, the New York Fed, then headed by Geithner, intervened and forced AIG to pay full price.
The New York Fed’s decision to pay the banks in full cost AIG — and thus American taxpayers — at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps.
Wait. It gets much worse. Goldman Sachs, the vampire squid of the investment banking world got quite a lot of that money. The head of the New York Fed at the time was an ex-chairman of the board of Goldman. How cosy.
The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made. Friedman, 71, resigned in May, days after it was disclosed by the Wall Street Journal that he had bought more than 50,000 shares of Goldman Sachs stock following the takeover of AIG.
Gosh, that certainly seems like it could be construed as insider trading, doesn’t it? Has Friedman been investigated for this? Why was this slimy New York Fed deal even allowed to happen? It clearly was not in the public interest at all, not even slightly and the Fed refuses to make details of it public.
Court documents say Hector Ruiz, who was then CEO of AMD, gave insider info to Danielle Chiesi, a defendant in the Galleon case. Let that sink it. A CEO of a major company has been implicated in insider trading.
Let’s bring back the Martha Stewart standard. She did five months in prison as the result of avoiding a loss of $45,673 by selling a stock early based on insider info. Anyone involved now in insider trading should be judged under that standard too. Because the corruption and stench coming from Wall Street is now unbearable.
Babylon’s burning, baby / Can’t you see? / Babylon’s burning / With anxiety
Quadrum Capital Management got subpoenaed as part of the Galleon insider trading investigation – and was immediately shut down by its head, Richard Grodin. Further, there are long-lasting ties between Quantum and SAC Capital Advisors, which is headed by very big dog Steve Cohen.
Did I mention one of the cooperating witnesses in the Galleon arrests used to work for Grodin? In my opinion, the Galleon case is going nuclear. Expect many former high-fliers to be brought low. And just how many hedge funds have been trading on insider knowledge? Inquiring minds want to know.
The comments at Zero Hedge generally think if Cohen was involved, that he’s too big to bring down. The collateral damage to the markets would be too severe so it would be politically untenable to indict him. Maybe. But if someone is looking at 40 years and can maybe bang that down to 15 if he becomes a cooperating witness, then… That’s how the code of silence on mafioso was broken. The prison terms for drugs were so severe that some who got indicted started talking. That was all it took. The wall of silence crumbled.
He’s Tamil, from Sri Lanka. and gave the Tamil Rehabilitation Organization $3.5 million. Their assets were frozen in the US in Nov 2007 by Treasury after being judged a link to the Tamil Tigers.
The Feds apparently used techniques against him they typically use against organized crime and drug cartels, and this has Wall Streeters in a frenzy of panic. (Um, why haven’t the Feds always used such techniques?)
The insider trading was simple. They had informants everywhere who would leak them important insider knowledge that they would then trade upon. One informant was at Moody’s, there were many others.
Rajaratnam is a billionaire. The insider trading netted him $20 million over a number of years. He didn’t need the money. Sue is a Certified Fraud Examiner and says, ‘why do people worth $200 million try to steal a few million more. I don’t know why either, but it happens all the time.’