NEW YORK — Federal authorities revealed charges Tuesday against three hedge-fund portfolio managers and a hedge-fund analyst, describing a paper- shredding, flash-drive-destroying panic that ensued when they thought they faced the scrutiny of investigators.
The two new arrests and the announcement of two guilty pleas expanded a federal crackdown on insider trading that masks itself as legitimate market research. The case raised the number of people charged in the probe to 12.
The Securities and Exchange Commission said the conspiracy earned more than $30 million in illegal profits.
“Shred as much as u can,” one of the men wrote to another in a string of electronic messages that were traded after they saw news reports describing U.S. Attorney Preet Bharara’s assault on Wall Street insider trading, according to a criminal complaint filed in U.S. District Court in Manhattan.
The investigation was revealed in the fall and has concentrated on a group of hedge-fund portfolio managers who authorities say tried to learn inside information about public companies through contacts at a California-based public-research firm, Primary Global Research.
FBI Assistant Director Janice Fedarcyk said the latest charges exposed the cynicism of what some call market research.
“When you are paying insiders for earnings data before it’s announced, that isn’t ‘research.’ That’s cheating,” she said.
Charged were Samir Barai, 38, who owned a New York hedge-fund company; Donald Longueuil, 34; Noah Freeman, 34; and Jason Pflaum, 37. Freeman and Longueuil were described as hedge- fund portfolio managers while Pflaum was described as a research analyst.
