Pequot settles insider trading case for $28m

28 May 2010

Pequot Capital Management has agreed to pay $28 million to settle an insider trading case brought by the Securities and Exchange Commission (SEC).

The defunct hedge fund and its former chief executive officer Arthur Samberg had been accused by regulators of getting inside information from a Microsoft worker, David Zilkha.

It was said that Mr Samberg was in the process of hiring Mr Zilkha when the offence took place and asked him for his "current views" about Microsoft in an email confirming an offer of employment in February 2001.

The SEC alleged that Mr Samberg went on to ask Mr Zilkha for further "tidbits" in April of that year, before using the information he passed over to make around $14 million in illegal profits for Pequot from trading deals.

Pequot, which was wound down last year to allow Mr Samberg to concentrate on fighting the case, has now agreed to settle the case with the SEC, while not admitting or denying the charges made against it.

Mr Zilkha is currently facing a separate action from the SEC related to the allegations and has been given 20 days to respond to the charges.

David Bergers, head of the SEC's Boston office, said: "We are continuing to hold hedge fund managers accountable when they engage in insider trading."

Insider trading has been a hot topic on Wall Street since the arrest of Raj Rajaratanam, the founder of the Galleon Group hedge fund, last year.

A wide-ranging investigation discovered a web of insider trading deals, with Mr Rajaratnam alleged to be at its core.

Earlier this month, Mark Kurland, a former hedge fund partner at New Castle Funds, became the first person to be sentenced for his part in the ring, receiving a 27-month prison term.

Of the 21 people facing criminal charges for their part in the crime, 11 have pled guilty so far, reports the Wall Street Journal.

By Gary Cooper

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