Hedge fund star Einhorn fined £7.2m for insider trading

David Einhorn, the brash American hedge fund manager famed for taking huge, aggressive bets against companies' share prices, has been slapped with a £7.2m fine for insider trading in the British pubs giant Punch Taverns.

The total fine – split equally between Mr Einhorn and his hedge fund, Greenlight Capital – meant that the 43-year-old billionaire and his firm were in effect only £1.4m down on the deal.

Mr Einhorn had been told on a telephone conference call by Punch's corporate broker, Merrill Lynch, that the company was close to staging a massive £375m fundraising – a move that would inevitably push down its share price. Minutes after the call, he gave instructions to sell his firm's entire stake in Punch. Over the next four days, Greenlight sold 11.6 million shares, taking its stake down from 13.3 per cent to 8.89 per cent. The following day, Punch announced the deal, triggering an instant 30 per cent crash in the share price. By selling the shares, Mr Einhorn avoided losses of nearly £5.8m.

Mr Einhorn, famed for betting against Lehman Brothers' shares in 2008, successfully claimed that, despite having run his own hedge fund for 15 years, he had been unaware that the news was inside information. The FSA believed him, but fined him for the fact that, as such a seasoned and serious professional, he should have realised it was.

In his defence, Mr Einhorn said the broker had phoned the previous day to ask if he would commit to being made an insider to the fundraising information – which would prevent him from trading. He refused, but the broker still went ahead the next day with the conference call with management in which the inside details were given.

Mr Einhorn said in a statement: "We believe that this action is unjust and inconsistent with the law and with prior FSA enforcement precedent. However, rather than continue an arduous fight, we have decided to put this matter behind us and concentrate on managing our business."