Monday, January 31, 2011

White Collar and Securities: New Investigation of Hedge Fund

Today, The New York Times is reporting that Samir Barai and his hedge fund Barai Capital Management is under investigation for insider trading ( The report says that the Federal Bureau of Investigation executed a search warrant at Barai Capital last November.

The investigation is associated with a criminal complaint against Winifred Jiau. In December the government charged Jiau with leaking confidential information about technology companies to two money managers. One of those managers is reportedly Barai. The companies involved are Marvell Technology and Nvidia. The complaint against Jiau alleges that she provided the information to the money managers in 2008. It says that she provided specific financial information about the companies before the public release of that information.

Specifically, regarding Marvell, the complaint against Jiau alleges that she told the fund managers that Marvell's revenue for the upcoming quarter would be approximately $805 million and its gross margins would be 53%. In a follow up call she amended her figures to a more exact prediction of $804 million in revenue, gross margins of 51.6%, and earnings of $.11 per share. Those numbers turned out to be quite prescient. It is alleged that Barai's fund made in excess of $820,000 by trading Marvell securities between May and June 2008.

On the scale of complexity insider trading cases are easier for prosecutors to establish that frauds allegedly based on products and statements that led to the economic crisis but significantly more difficult than penny stock "pump and dump" schemes.

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