New York Hedge Fund Founder Convicted of Insider Trading

October 04, 2012

New York Hedge Fund Founder Convicted of Insider Trading

A Manhattan federal court recently found Doug Whitman, founder of the hedge fund Whitman Capital LLC, guilty of insider trading and securities fraud. The conviction could result in a lengthy prison sentence, which will be determined at a sentencing hearing scheduled for Dec. 20, 2012. The judge could issue 20 years of imprisonment for the violation.

This case is just one example of a crackdown on insider trading and other white collar crimes by both the U.S. Securities and Exchange Commission and the Federal Bureau of Investigation.

The SEC increased prosecution of insider trading by almost 10 percent in 2011 and continues to hold insider trading enforcement as a top priority. According to Bloomberg Magazine, the FBI is also pushing to "clean up" Wall Street and prosecute those who are alleged to have broken the law. It began an initiative focusing on insider trading five years ago and continues to investigate claims of abuse. This most recent conviction results in 67 criminal prosecutions for insider trading tied to the initiative.

Hedge Fund Founder Prosecuted for Insider Trading

Mr. Whitman's case is the most recent of many insider trading cases pursued by the SEC and FBI. The business entrepreneur was accused of using illegal tips from connections inside the technology industry to guide how he ran his stock business.

The tips purportedly provided significant information that was not available to the public about various companies. The hedge fund provider allegedly received quarterly financial information from at least two companies, one of which was Google. The prosecution claimed Mr. Whitman purchased and traded stocks based on this illegally obtained information. Mr. Whitman argued that his decisions to buy and sell securities were based purely on research.

The court determined that Mr. Whitman's actions violated the law and convicted him of insider trading. Insider trading is a federal crime and can carry severe penalties including both fines and potential prison time.

The SEC Defines Insider Trading Broadly

According to the SEC, any person who is "aware" of important nonpublic information when buying or selling stock is guilty of insider trading. However, there are a variety of exceptions and defenses to this rule.

Navigating the maze of insider trading allegations is confusing and complex. Unfortunately, even the allegation of insider trading or another white collar crime can tarnish an individual's professional reputation and harm his or her career. As a result, it is important to take such accusations seriously and act quickly.

If you or a loved one is charged with insider trading it is important to contact an experienced white collar crimes attorney to discuss your legal options.

Article provided by The Law Office of Scott M. Green
Visit us at http://www.scottgreenlawny.com/