Federal authorities may file a series of insider trading cases against hedge fund traders, consultants and Wall Street bankers within weeks, several lawyers familiar with the situation said.
Prosecutors and securities regulators are likely to file a number of cases targeting the $1.7 trillion hedge fund industry rather than a single spectacular case, said the lawyers, who have knowledge of the investigations but did not want to be identified since details have not been made public.
The new round of prosecutions could start in the next few weeks or early next year, the lawyers said, but it is too soon to say whether they will rival last year's arrest of Galleon Group hedge fund manager Raj Rajaratnam and nearly two-dozen others, one of the largest insider trading cases ever.
The Wall Street Journal reported in its Saturday edition that federal authorities, after a three-year investigation, were preparing insider trading charges against a host of financial players including investment bankers and hedge fund managers that could surpass any previous investigations.
Legal sources told Reuters that some of the new charges may be lodged against a number of individuals who were implicated in the Galleon case as well as another major insider trading case, but were never formally charged.
While the full scope of the investigation by prosecutors and the Securities and Exchange Commission is unclear, the sources said one area of focus is the use of so-called expert network firms, which command big fees from hedge funds to match them with experts in particular industries.
Federal authorities also have been looking into whether investment bankers and others may have tipped off some traders to news concerning negotiations in buyouts of several pharmaceutical companies. An SEC official declined to comment.
Federal authorities are still deciding whether to pursue cases against several individuals who were implicated but never charged in the Galleon case and another case involving a former UBS investment banker, several people familiar with the situation said.
One individual sitting on the prosecutorial bubble is former SAC Capital Capital Advisors analyst Jonathan Hollander, who last worked for Steven Cohen's $12 billion hedge fund in November 2008.
Federal authorities have linked Hollander to several allegations of insider trading in both court filings and testimony at a recent criminal trial, but he has not been charged with any wrongdoing.