Extensive insider trading investigation drawing to close, official says

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Federal investigators in New York are wrapping up an extensive investigation into allegations of insider trading and other stock-trading irregularities that could bring criminal charges or monetary fines against a large number of Wall Street executives and investors, a Washington official who has been briefed on the inquiry said Saturday.

Speaking anonymously so as not to jeopardize the case, the official said the investigation has been underway for “several years” and is likely to result in the prosecution of traders “around the country.”

“They are in the final stages with this,” the official said. “It could bear fruit by the end of this year.”


Speculation first arose that the FBI and other federal investigators were nearing the end of a years-long inquiry into irregularities when Preet Bharara, the U.S. attorney in Manhattan, gave a speech in October warning that “illegal insider trading is rampant and may even be on the rise.”

Bharara added, “Disturbingly, many of the people who are going to such lengths to obtain inside information for a trading advantage are already among the most advantaged, privileged and wealthy insiders in modern finance. But for them, material nonpublic information is akin to a performance-enhancing drug that provides the illegal ‘edge’ to outpace their rivals and make even more money.”

News that investigators were nearing the end of their inquiry was first reported Friday night on the Wall Street Journal’s website. The newspaper said that the investigation “could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts.”

Other sources close to the investigation described the effort as a “big case” and speculated that the number of people likely to be arrested could be in the double digits.

Already, nearly two dozen people have been charged with insider trading in recent years in a separate investigation that Bharara has termed “the largest hedge fund insider trading case in history.”

Just this month, two Wall Street traders pleaded guilty to securities-fraud charges.

Also this month, an executive with a technology company was sentenced to 18 months in prison for slipping insider information about his company to a hedge fund manager.


Bharara said the prison sentence for the executive, Ali Hariri, a former official with Atheros Communications, should “remind those who might contemplate similar crimes that we will ultimately find you, prosecute you and convict you.”

But the current investigation could top the size of the other cases.

“We are taking this very seriously,” the government official said.

A spokesman with the Securities and Exchange Commission declined to comment about the ongoing investigation Saturday, and officials with Bharara’s office in New York did not

return a call seeking comment.