SAC Capital, Citadel Received Subpoenas on Tuesday

Illustration of a Businessman Shredding EvidenceA few short days ago, the Wall Street Journal broke the news that federal authorities are concluding a three-year investigation into possible widespread insider trading on Wall Street.

The WSJ reported that authorities were investigating every level of the Wall Street food chain from analysts to consultants to investment bankers to mutual-fund traders.

Unidentified sources quoted by the WSJ claimed that the investigation "could eclipse the impact on the financial industry of any previous such investigation".

Given the events that have taken place over the past couple of days, it certainly seems as though this quote has some truth to it.

On Monday, the FBI raided three hedge funds - Loch Capital Management LLC, Diamondback Capital Management LLC, and Level Global Investors LP - as part of an "ongoing investigation". This news rattled Wall Street - according to the Associated Press, "several white-collar defense lawyers in New York said they were bombarded by calls from traders seeking representation".

Two of the three funds that were raided on Monday, Diamondback Capital Management LLC and Level Global Investors LP, are run by former managers of SAC Capital Advisors LP. SAC Capital has come up often in reports about this insider trading investigation.

The investigation continued to widen on Tuesday, as a number of high-profile hedge funds, mutual funds and institutional investment firms received subpoenas from the Manhattan US Attorney's office as part of a "broad criminal investigation". SAC Capital was one of the firms that received a subpoena on Tuesday, claiming that the subpoena that they had received was "extraordinarily broad". SAC Capital maintained its innocence in a letter sent to investors on Tuesday.

Some of the other well-known firms that received subpoenas on Tuesday were Citadel LLC, Janus Capital Group Inc. and Wellington Management Co. These are all very large and well-known firms with many billions of dollars in assets under management. Janus dropped roughly 3% on Tuesday after word leaked out about the subpoena.

Given the speed at which authorities have been moving over the past couple of days, you can't help but think that the WSJ article may have caused federal authorities to push forward their timeline and move quickly in order to prevent the possible destruction of potentially crucial documents. The amount of movement in this investigation over just the past two days has been breath-taking, and you have to wonder just what is going to happen next.

Source: - Trading Inquiry Widens to Big Firms

Filed under: Stock Market Scandals

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