Federal authorities conducting a major investigation of alleged insider trading on Wall Street have charged the head of an "expert network" firm who, they say, arranged for executives to leak corporate secrets to hedge-fund managers.
Don Ching Trang Chu, also known as Don Chu, promoted the services of his California-based firm, Primary Global Research, for the purposes of insider dealing, according to a criminal complaint unsealed yesterday. Mr Chu was arrested before he was due to leave the country at the weekend.
Expert networks, which bring together investors and industry experts, have become the focus of the gathering investigation. Mr Chu's case is related to the arrest last year of Raj Rajaratnam, founder of the hedge fund Galleon, and almost two dozen traders and their sources.
Mr Chu is alleged to have struck up a friendship with one fund manager, Richard Choo-Beng Lee from a firm called Spherix Capital, who has pleaded guilty in the Galleon case and is now a co-operating witness. Primary Global experts gave Lee inside tips on several companies in 2008 and 2009, it is claimed.
The complaint said that one way expert network firms get paid is through "soft dollars", where a hedge fund client executes trades through a designated brokerage that has some relationship with an expert network firm.
Mr Rajaratnam, who has pleaded not guilty to insider trading, yesterday lost a court battle to exclude wiretap evidence from his trial.