(Adds details of new charges, background, starting in fifth
paragraph.)
By Dan Strumpf
NEW YORK--Federal prosecutors filed new charges Tuesday against
employees at three hedge funds accused of making improper trades on
inside information.
The new charges relate to short sales of NVIDIA Corp. (NVDA)
stock in April and May 2009. Those charged Tuesday were Todd
Newman, a former portfolio manager with hedge-fund firm Diamondback
Capital Management; Anthony Chiasson, a former hedge-fund manager
at Level Global Investors LP; and Jon Horvath, a technology analyst
with SAC Capital Advisors LP's Sigma Capital Management
division.
The new charges broaden the case against Messrs. Newman,
Chiasson and Horvath, who were originally charged in January with
engaging in a "criminal club" that prosecutors said netted more
than $61.8 million through improper trades of stock, including
shares of Dell Corp. (DELL) stock.
All three men had pleaded not guilty to the original charges in
February.
The new, superseding indictment filed in Manhattan federal court
Tuesday contains three new charges against the defendants related
to transactions of NVIDIA stock, saying they traded nonpublic
information in advance of NVIDIA's quarterly financial results
reported in May 2009.
The new indictment accuses Mr. Newman of short selling 375,000
shares of NVIDIA stock in April 2009 based on nonpublic
information. Mr. Chiasson is accused of improperly short selling 1
million shares of NVIDIA stock in May 2009. Mr. Horvath is accused
of an improper swap transaction equivalent to a short sale of
160,000 shares of NVIDIA stock in May 2009. A short sale involves a
bet that a stock will lose value.
The earlier indictment had charged the three men with improper
trades of only Dell stock, although it referenced the sharing of
nonpublic information about NVIDIA.
Prosecutors have said a larger number of stocks could be at
issue at their trial, which is set to begin Oct. 29.
An attorney for Mr. Newman declined to comment on the new
charges. Attorneys for Messrs. Chiasson and Horvath could not
immediately be reached for comment.
The case is one of many high-profile insider-trading cases
recently. Earlier this year, Rajat Gupta, a former director of
Goldman Sachs Group Inc. (GS) and Procter & Gamble (PG), was
found guilty of conspiracy and securities fraud for passing on
insider information to Galleon Group hedge fund founder Raj
Rajaratnam.
This year, federal authorities in New York told The Wall Street
Journal they were seeking to build cases against 120 others
suspected of having violated insider-trading laws.
--Reed Albergotti contributed to this report.
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