Roomy Khan, one of several former traders cooperating with the prosecution of the biggest U.S. hedge fund insider trading case, told a judge she provided confidential information to several co-conspirators, according to a court document made public on Thursday.
Khan is one of at least five people who have pleaded guilty to criminal charges since the prosecution of Galleon Group hedge fund founder Raj Rajaratnam and others was first announced on October 16.
Between 2004 and November 2007, I along with several co-conspirators engaged in a conspiracy to commit securities fraud, Khan said, according to a transcript of an October 19 plea proceeding in Manhattan federal court.
In particular, I used inside information provided to me by co-conspirators who worked for publicly traded companies and investor relations companies who had access to confidential information on particular companies and used it to make profitable trades.
Additionally, I provided the information to several co-conspirators who worked for various hedge funds, who also traded on the inside information for profit.
Khan told U.S. Magistrate Judge Debra Freeman that on July 2 and July 3, 2007, she bought securities in anticipation of a merger announcement.
These trades were made on the basis of the inside information provided to me by a source in New York City, Khan told the court.
The proceeding was closed by court order and the transcript was made public on Thursday. In the hearing, Khan did not reveal any names of co-conspirators.
Some 20 defendants including the billionaire Rajaratnam face criminal charges, civil charges or both. Prosecutors have identified $40 million of illegal profits, while the U.S. Securities and Exchange Commission has found $53 million in its civil investigation.
Khan told the judge she started cooperating with the government in early 2008 and admitted trying to cover up the tracks of a co-conspirator.
I deleted an incriminating e-mail sent to me -- sent to me from one of my co-conspirators, rather than turning it over to the government investigators, Khan said in court.
With respect to all the counts, I knew what I was doing was wrong and illegal, said Khan. She pleaded guilty to securities fraud, conspiracy and obstruction of justice.
Khan was released on $500,000 bond and surrendered her passport.
The case is USA v Khan, U.S. District Court for the Southern District of New York, No. 09-991.
(Reporting by Grant McCool, editing by Gerald E. McCormick)