Dirty dealings on Wall Street may be as old as the Street itself, but the stakes are higher now, given the trillions swirling around hedge funds.
But with the growing use of government wiretaps to catch wrongdoers, the field may be leveling.
That’s the message of “Circle of Friends,” a new book by Fox Business Network reporter Charles Gasparino that gives readers an inside peek into the massive insider-trading crackdown still unfolding on Wall Street.
The book, published by HarperCollins, makes it clear that the world of finance has long been rigged by people with connections — going back to the days of Alexander Hamilton.
Certainly this was the case leading up to the Great Depression, when Joseph P. Kennedy, who went on to head the Securities and Exchange Commission, engaged in pump-and-dump schemes, said Gasparino, a former CNBC and Wall Street Journal reporter.
But back then, “Wall Street was regarded by regulators as ‘buyer-beware’ territory,” Gasparino said.
Today, small investors still have a tough time competing, but “Circle of Friends” seems to hint at change for the better — at least when it comes to catching stock manipulation and insider trading.
Trades on confidential tips have become easier to trace thanks to technological improvements and legal precedents that give the authorities greater reach to go after anyone who trades on confidential tips, the book said.
Yet insider trading has become the crime du jour with the rapid growth of opaque hedge funds, which now manage $2.2 trillion in assets.
Indeed, the rise of hedge funds means that the phenomenon is “no longer confined to a few dumb-ass players like Sam Waksal,” the former CEO of ImClone Systems, and Martha Stewart, the domestic diva who sold her ImClone shares with impeccable timing, Gasparino explains.
Instead, insider trading has become sophisticated, and it has lured the feds to their current, high-profile cat-and-mouse game with hedge fund titan Steve Cohen.
“Circle of Friends” traces suspicions of insider trading at Cohen’s SAC back to 2006, when grocery-store chain Pathmark was getting ready to merge with A&P.
“How the f*** did Steve Cohen know about the deal?” a Pathmark board member raged to one of the company’s attorneys, the book says.
Cohen has not been accused of wrongdoing, but SAC has been linked to as many as nine people charged with or implicated in illegal insider trading.