Jun 08, 2012, 01.44 PM | Source: Reuters
Federal authorities are moving from the skyscrapers of Manhattan to the clubby world of retired baseball players in California to uncover the next insider trading ring.
An ongoing insider trading investigation by US prosecutors in Los Angeles is focusing on a retired, well-known baseball player and several other former athletes whose names have not yet been disclosed, said two people familiar with the situation.
The former athletes under scrutiny - mainly a group of professional baseball players - are allegedly part of what one US investigatory government official described as "a loose federation of people" sharing important market-moving information about various companies before it becomes public.
The investigation is part of a sweeping federal probe that has led to the conviction of Galleon Management founder Raj Rajaratnam and dozens of other hedge fund traders and corporate consultants. Part of the probe is also focusing on a San Francisco-based Goldman Sachs
But people familiar with the roughly three-year-old investigation of the ballplayers, conducted by federal prosecutors and the US Securities and Exchange Commission, say it is possible that not everyone will be charged, criminally or civilly.
These sources, who did not want to be identified because the investigation isn't public, pointed out that federal prosecutors in Los Angeles have moved more slowly than their counterparts in New York, partly because prosecutors in California have less experience with insider trading cases.
The sources did not identify any of the ballplayers under scrutiny nor the teams they once played for because no one has been charged with wrongdoing.
Still, the investigation is an indication that US probes into insider trading are far from over and are not confined simply to rooting out bad actors in the USD 2 trillion hedge fund industry. If anything, this other phase of the insider trading investigation shows the extent to which the trading on corporate secrets has gone beyond traditional Wall Street firms.
"It used to be on the surface where we were picking up individual guys. And we didn't see anything underground," said Jonathan Macy, a securities law and corporate finance professor at Yale Law School. "Now it's a massive web of underground tunnels we're digging up."