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By Basil Katz
January 18, 2012 3:28 PM EST
Seven people were charged with a scheme to reap nearly $62 million in illegal profits on trades on Dell Inc shares, the latest salvo in a sweeping probe of suspicious trading at hedge funds.
The FBI in New York arrested four people on Wednesday and authorities announced previously secret charges against three others, making this case one the largest in the office's long-running probe of insider trading.
Dubbed the "Perfect Hedge," the probe has examined suspected sharing of confidential business information with hedge fund managers and analysts. Galleon Group hedge fund tycoon Raj Rajaratnam was arrested as part of the investigation and is now serving an 11-year prison term.
The defendants arrested on Wednesday include Anthony Chiasson, who co-founded the Level Global Investors hedge fund. He turned himself in to the FBI in New York, an agency spokesman said.
Todd Newman, who headed technology trading for hedge fund Diamondback Capital Management from Boston, was also arrested, the spokesman said.
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Chiasson and Newman are accused of illegally trading ahead of computer maker Dell Inc's 2008 first and second quarter earnings announcements, netting them $57 million and $3.8 million respectively in profits. Another defendant, Jon Horvath, is accused of making a $1 million, illegal Dell trade.
The earnings information was provided by an unnamed source at Dell and relayed to the defendants, court documents said.
A Dell representative could not immediately be reached for comment. Lawyers for the trading defendants could not immediately be reached for comment.
Newman had been placed on leave of absence from Diamondback in 2010 and subsequently was let go by that firm. Reuters in November reported the government's interest in Newman.
Chiasson, Newman, Horvath and one other were charged in U.S. District Court in Manhattan with one count each of conspiracy to commit securities fraud and securities fraud, according to court documents.
Horvath, who was also arrested on Wednesday, is currently employed at Sigma Capital management, a unit of Steven A. Cohen's $14 billion hedge fund SAC Capital, said a person familiar with the case who is not authorized to speak publicly.
A spokesman for SAC Capital could not immediately be reached for comment.
A fourth person was arrested in Los Angeles earlier on Wednesday, the FBI spokesman said.
Charges also were made public against three other people who have previously pleaded guilty and are cooperating with the government, court documents showed.
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