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 tipped several people at hedge funds with inside information on companies to make money from trades, according to a court document.
In an October 19 transcript of her guilty plea, made public on Thursday, Khan also said she destroyed an incriminating email from an accomplice in early 2008 despite knowing of an ongoing U.S. Securities and Exchange Commission investigation.
Between 2004 and November 2007, I along with several co-conspirators engaged in a conspiracy to commit securities fraud, Khan said. 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.
I provided the information to several co-conspirators who worked for various hedge funds, who also traded on the inside information for profit.
Khan, 51, is one of at least five people who have pleaded guilty to criminal charges since prosecutors on October 16 announced criminal charges against the Galleon Group hedge fund's billionaire founder Raj Rajaratnam and others.
Some 20 defendants 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.
According to the transcript, Khan did not reveal names of co-conspirators or companies whose inside information was used. Prosecutors believe Khan made $1.6 million in illegal profits.
HILTON HOTELS TIP
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 said. She said the person was an analyst at a rating agency covering hotel stocks, advising the company on the merger.
Investigators have said their probes involve the divulging of non-public details about several companies, including a pending takeover bid in July 2007 for Hilton Hotels Corp, which was later bought by Blackstone Group LP
Deep Shah, a former analyst at credit rating company Moody's Corp
Khan separately admitted that in early 2008, while cooperating with an SEC investigation, she tried to cover the tracks of a co-conspirator.
I deleted an incriminating email sent to me -- sent to me from one of my co-conspirators, rather than turning it over to the government investigators, said Khan.
Khan lived in California at the time of her offenses but now lives in Fort Lauderdale, Florida, according to court documents.
Khan pleaded guilty to securities fraud, conspiracy and obstruction of justice, and was released on $500,000 bond and ordered to surrender her passport. She faces up to 20 years in prison but could get a lesser sentence for cooperating.
In an SEC complaint, Khan is known as Tipper A, a hedge fund manager who worked for Galleon in the 1990s and tried to rejoin Rajaratnam in 2005 as her own finances worsened.
Ali Far, co-founder of the hedge fund Spherix Capital LLC, admitted to paying an employee of chipmaker Marvell Technology Group Ltd
Far and Richard Choo-Beng Lee, who are both government informants in the Galleon case, admitted to illegal insider over many years, court documents made public on November 5 show.
The agreements suggest that Lee engaged in illegal insider trading while working at Steven Cohen's SAC Capital, a Connecticut hedge fund. He has not been associated with SAC since 2004.
Galleon was managing $3.7 billion when Rajaratnam was arrested, but is now winding down its funds. Rajaratnam is free on $100 million bond.
The case is USA v Khan, U.S. District Court for the Southern District of New York, No. 09-991.
(Reporting by Grant McCool and Jonathan Stempel; Editing by Gerald E. McCormick, Bernard Orr)