Rajaratnam Ordered to Pay $92.8 Million Penalty (NYT)
A federal judge on Tuesday ordered the convicted hedge fund titan Raj Rajaratnam to pay a $92.8 million penalty, the largest ever assessed against a person in a Securities and Exchange Commission insider trading case. Combined with the fines and forfeitures ordered last month when he was sentenced to 11 years in prison for insider trading, Mr. Rajaratnam will be paying a total of $156.6 million.
Citi’s Hedge Fund 1.0, saw the hedge fund industry as a niche business, with funds typically relying upon a single prime broker to support trading and reporting. In Hedge Fund 2.0, the next evolutionary phase, funds expanded to include more specialized arbitrage, event-driven, macro and credit-related strategies. “The Hedge Fund 3.0 concept reflects the emergence of specialty providers who focus on the hedge fund industry, enabling fund managers to concentrate on key aspects of investment management while reducing their base of fixed costs,” Alan Pace, Head of Prime Finance in the Americas at Citi, said. “These experts have a keen understanding of the complexities of hedge fund management and can lift the burden of building and maintaining the infrastructure needed to handle complex trading strategies, as well as extensive regulatory and reporting demands.”
Cardano, a pensions manager that looks after about £5bn in the UK and is a large investor in hedge funds, is considering a move into distressed debt strategies if and when the eurozone crisis moves toward resolution — believing the best managers will be able to make big gains.
SEC Seeks to Question Rajaratnam Brothers in Gupta Case (Businessweek)
The U.S. Securities and Exchange Commission wants to question under oath “one or both” brothers of Raj Rajaratnam for its lawsuit against Rajat Gupta, the former Goldman Sachs Group Inc. director, an agency lawyer said. The SEC sued Gupta on Oct. 26, accusing him of feeding tips to Rajaratnam, the Galleon Group LLC co-founder convicted of being at the center of the largest hedge fund insider-trading case in U.S. history. “We have a long list of witnesses including the defendant and one or both of Mr. Rajaratnam’s brothers,” Kevin McGrath, a lawyer for the SEC, told U.S. District Judge Jed Rakoff today at a hearing in Manhattan.
A prominent Philadelphia lawyer was arrested and charged with running a $1.1 million fraud that included an undisclosed loan from a hedge fund. Michael Kwasnik faces four counts, including theft. He and four others, including his father, were also sued by the New Jersey State Attorney General. The heart of the New Jersey charges is that Kwasnik ripped off an elderly Cherry Hill woman to the tune of $1.1 million. But the lawsuit alleges that $5 million of the $13.5 million raised by Kwasnik’s Liberty State Benefits was stolen, and that its life settlement policies were pledged as collateral for a $2.3 million loan from a Canadian hedge fund, Westdale Construction Co. Liberty State never told investors about the loan, or the fact that it defaulted on it.
A federal judge has gone through with his plan to fine a man for passing confidential corporate information to his hedge fund manager son. U.S. District Judge Robert Patterson said last month, while sentencing H. Clay Peterson to two years’ probation and three months of house arrest, that he might also fine him $400,000. Last week, he decided that his initial inclination was the right one, and ordered the fine. Peterson pleaded guilty in August to tipping his son Drew off to the impending acquisition of Mariner Energy, on whose board the senior Peterson served. Drew Peterson then tipped off another hedge fund manager, Big 5 Asset Management’s Bo Brownstein. Both Drew Peterson and Brownstein have pleaded guilty in the case. Prosecutors had not sought a fine from Patterson. Peterson’s defense team suggested a $126,000 fine instead, citing their client’s limited assets and his diminished future earnings capacity.
The litigation and mudslinging surrounding hedge fund DoubleLine Capital hasn’t kept investors away. The firm, whose first hedge fund raised $1 billion within three months of its launch last year, now boasts another $1 billion vehicle. A mutual fund launched by the Los Angeles-based firm last June now manages $1 billion, DoubleLine said.
Xcel Energy to Abandon Plans to Build Power Line Through Louis Bacon’s Ranch (FINAlternatives)
Louis Bacon has lost every single round in his fight to keep a 140-mile power line off of his massive southern Colorado ranch, but he appears to have fought one opponent to exhaustion. Xcel Energy announced this week that it was dropping out of the project.
When it comes to its first foray into energy fund management, the Blackstone Group isn’t starting small. The private equity giant hopes to raise up to $3 billion for its first energy fund, Bloomberg News reports.
A major Texas public pension fund will make a pair of major investments in two major private equity firms. The Teacher Retirement System of Texas will invest $3 billion each in Apollo Global Management and Kohlberg Kravis Roberts, the firms announced yesterday.
Just a week after a federal judge tossed the Bernard Madoff receiver’s lawsuit against JPMorgan Chase, a pair of Madoff investors has taken her reasoning to heart. The investors, Stephen and Leyla Hill, filed a $19 billion lawsuit against the bank, accusing it, as did trustee Irving Picard before them, of ignoring red flags that pointed to Madoff’s $65 billion Ponzi scheme.
In a time when institutional investors have access to algorithms that are driven by AI and machine learning, it’s a great question.
Yet according to the United States Senate, the answer is NO!
Regular investors don’t stand a chance:
“Only a small percentage of (retail) day traders will be profitable”
The problem is, these AI-driven trading systems analyze massive amounts of data much quicker than people can. And these data-driven insights drive intelligent decision-making that gives institutional investors an advantage when trading.
In fact, Vice reports, “The algorithmic automation that has taken over the financial markets is pillaging the pockets of regular investors, concludes a new study from a top government economist.”
And while the global algorithmic tradingmarket size was valued at $12.14 billion in 2020, and is projected to reach $31.49 billion by 2028, growing at a compound annual growth rate (CAGR) of 12.7% from 2021 to 2028…
One company is tapping into this booming market in an attempt to even the score between retail and institutional investors.