Justice Dept. Widening Insider-Trading Probe to Include Corporate America
The Justice Department has subpoenaed dozens of companies across the country in its massive insider trading investigation, expanding the focus of the probe beyond the trading activities at major hedge funds to include whether corporate executives shared potentially market moving data with traders or other intermediaries, FOX Business has learned.
Sources close to the investigation say that, so far, the Justice Department has asked for company information and communications surrounding major events, such as mergers, acquisitions and major corporate announcements. According to one person with direct knowledge of this aspect of the probe, the DoJ has subpoenaed 50 or more companies as part of the probe.
It is unclear if company officials -- or possible "tippers" of allegedly illegal insider information -- are actual targets of the burgeoning probe, but this person said they are clearly on the DoJ's radar screen.
The possibility that company officials on a large scale may have shared potentially illegal insider information adds a new twist to the probe, which has so far focused on hedge funds like SAC capital, mutual funds, and expert networks, such as John Kinnucan's Broadband Research for possibly passing insider information to their clients.
Kinnucan, whose clients included SAC and other hedge funds and mutual funds, has told FOX Business that he expects to be charged in the investigation, though he also says he believes he's done nothing wrong.
However, following the information trail from companies to the expert networks to the trading desks will be key to proving cases, people close to the inquiry say.
A little more than a year ago, federal officials arrested Galleon Group founder Raj Rajaratnam for trading on inside information, a charge he continues to deny. Several weeks ago, US Attorney for the Southern District of New York Preet Bhrara signaled more arrests are coming. But so far only one person has been arrested in the latest leg of the wide-ranging investigation, though a senior regulator source says additional arrests could be made before the end of the year.
People close to the investigation tell FOX Business that the Justice Department officials are using the threat of arrests during the holiday season as leverage to gain cooperation among potential targets.
On Friday, speculation swirled that arrests could be made as early as this week, but a senior law enforcement official with direct knowledge of the probe said "it's impossible for anyone to know" the exact timing, since Justice Department officials rarely share such information even with the people they are about to arrest.