Worked at Firms with Ties to Steven Cohen of SAC Capital Advisors.

[ by Melanie Gretchen ]

After two full days of deliberation following the 5-week trial, U.S. prosecutors clinched their latest convictions in the government's exhaustive insider trading investigation.  On Monday, the jury of 12 New Yorkers - including a dog walker and a retired postal worker - convicted Anthony Chiasson, co-founder of Level Global Investors, and Todd Newman, former portfolio manager at Diamondback Capital Management, of fraud and conspiracy.   The pair had denied participating in an insider trading ring that rang up $70 million in illicit profits.

To date, 11 insider-trading defendants who have taken their cases to trial have been convicted since 2009, when prosecutors began bringing charges arising out its multiyear investigation into criminal activity at hedge funds.  Of the 72 people charged with insider trading crimes, including traders, corporate executives, consultants and lawyers, the United States attorney's office in Manhattan has secured 71 guilty pleas or convictions.

The SAC Connection.   Steven Cohen, who founded and currently runs SAC Capital Advisors - with $14 billion under  management - continues to be a focal point of the U.S. government investigation.  Though Mr. Cohen has not been accused of any wrongdoing, it is apparent that connections keep getting closer with each insider trading case. 

In the current case, the convicted former hedge fund managers worked at firms that were founded by former employees of SAC Capital Advisors.  David Ganek, a former star trader at SAC, co-founded Level Global with Chiasson.  During the trial, Judge Sullivan ruled that Mr. Ganek was a co-conspirator in the case. Mr. Ganek has not been charged with a crime, and his lawyer has said there is no evidence that he knew about any inside information. 

Diamondback, where Mr. Newman worked as a portfolio manager, was started by Richard Schimel and Larry Sapanski, two former SAC employees.  Another former Diamondback employee, Anthony Scolaro, pleaded guilty to insider trading in late 2010 and cooperated with the government.

[C-I Note: A very big question now is whether federal prosecutors can prove that David Ganek was aware of and/or took advantage of insider information that Anthony Chiasson used, while working at Level Global.]

For further details, go to [Dealbook, 12/17/12] and our Behind the News story [Noose Tightens Around SAC's Cohen].