Insider trading is not cool and one financial giant is learning that the hard way.
Bloomberg is reporting that Doug Whitman, founder and president of Whitman Capital, was charged with using illegal tips on Google, Polycom and Marvell Technology to gain more than $900,000.
An indictment filed in Manhattan federal court yesterday said that Whitman had traded information two sources, one of whom had also traded information to Raj Rajaratnam. The SEC has also sued Whitman and his California hedge-fund firm for insider trading practices.
“Whitman recognized the value of the information he got, and paid cash for it in one case, and bartered his own inside information in the other,” Janice Fedarcyk, assistant director in charge of the FBI’s New York office, said in a statement.
Whitman has been charged with two counts of conspiracy to commit securities fraud and two counts of securities fraud. He faces up to five years in prison for each conspiracy charge and up to 20 years for each fraud charge.
Whitman pleaded not guilty yesterday in Manhattan federal court and was released on a $1.5 million bond.
Whitman received his tips from former Intel executive Roomy Khan and his neighbor according to the SEC. Khan tipped off Whitman to the earnings of Polycom and Google before they were made public.
Interestingly enough, two men that Whitman had reportedly gained insider info from, Khan and Karl Motey, were the same men who helped put Rajaratnam behind bars last year.
Whitman's attorney, David L. Anderson, said that his client was not guilty and that Whitman "traded on the basis of lawful research and analysis, not unlawfully obtained inside information.”
Authorities said the case was brought forth by the efforts of the Obama's Financial Fraud Enforcement Task Force.