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Citi: $30 Million Fine for Alledgedly Leaking to Hedge Funds

Galleon Hedge Fund Insider Trading RajaratnamNew York (HedgeCo.Net) –  NY prosecutors have extracted a $30 million penalty from Citigroup for maintaining an alleged illegal message thoroughfare with insider traders.

“We are pleased to have this matter resolved. We take our regulatory compliance requirements very seriously and train all of our employees about these obligations.  We are also constantly working to improve, manage and monitor the compliance and controls process.” Citi said.

Citadel, GLG Partners, and SAC Capital received inside information according to a recently revealed settlement. A Citigroup analyst in Taiwan named Kevin Chang offered research, which pointed to lower shipments of the iPhone 5, to a select group of clients one day before the report was available to the rest of the market, Bloomberg reports.

  • Reuters reports: “Hey Kevin, are you picking up any order cuts to iPhone?” asked one SAC Capital trader on Dec. 12, 2012, according to the settlement. The same morning, an employee of SAC’s CR Intrinsic division also e-mailed Chang asking for his thoughts on another analyst’s newly released negative report. Several other SAC employees logged similar inquiries, including: “SAC request for conference call today URGENT.” Another read: “can u send me everything u have on the entire iphone 4/4s/5 supply chain?”  Citadel and GLG also chimed in. Chang apparently succumbed to the pressure and sent a preview of his unpublished research to the anxious Apple traders.”

    Citigroup suffered huge losses during the global financial crisis of 2008 and was rescued in November 2008 in a massive stimulus package by the U.S. government. On February 27, 2009, Citigroup announced that the United States government would take a 36% equity stake in the company by converting $25 billion in emergency aid into common stock with a US Treasury credit line of $45 billion to prevent the bankruptcy of the largest bank in the world at the time. The government guaranteed losses on more than $300 billion troubled assets and injected $20 billion immediately into the company.

Alex Akesson
Editor for HedgeCo.net
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