Spherix’s Lee Tells Judge He Got Inside Tips From Asia Source |
Date: Friday, November 20, 2009
Author: David Glovin and Linda Sandler, Bloomberg
Richard Choo-Beng Lee, the co- founder of Spherix Capital LLC who is cooperating in a U.S. probe of Galleon Group, told a judge at his guilty plea last month that he received insider information from “one of my sources in Asia.”
Lee, 53, is among five people who have pleaded guilty in a wide-ranging insider-trading investigation of hedge funds and is aiding federal prosecutors. In the transcript of his Oct. 13 guilty plea, which was made public yesterday, he elaborates on some of the allegations in the criminal documents filed against him.
“On Jan. 2, 2009, I received a telephone call from one of my sources in Asia,” Lee told U.S. Magistrate Judge Douglas Eaton. “During the call, he gave me inside information about a publicly traded technology company whose shares are traded on the NASDAQ stock exchange. I then caused Spherix’s hedge fund to sell short 205,000 shares.”
Lee’s past employers included SAC Capital Advisors LLC, the hedge-fund firm run by Steven Cohen, where he was an analyst from 1999 to 2004, and Stratix Asset Management LLC, a now- closed New York hedge fund that he joined when it was started by two former SAC Capital traders.
U.S. prosecutors have charged 20 people including Galleon Group founder Raj Rajaratnam with insider trading. In civil and criminal court papers, authorities outline a network of corporate insiders, hedge fund executives, and others who passed along or traded on confidential news, generating $53 million in illegal profits. Lee and his partner at San Jose, California- based Spherix, Ali Far, are among the five who are aiding the U.S. probe. Far also worked as an analyst and portfolio manager at Galleon.
Rajaratnam denies wrongdoing.
Accomplices
Lee, who was born in Malaysia, was a colleague of Rajaratnam’s almost two decades ago at research firm Needham & Co. Rajaratnam, a native of Sri Lanka, was an investor in Spherix, which closed in March after gaining 10 percent in 2009, according to a person familiar with the firm, who asked not to be named because the information is private.
After Spherix closed, Lee sought to return to Stamford, Connecticut-based SAC, according to another person familiar with the matter. He was turned down. SAC wasn’t a Spherix client, the person said. The firm isn’t mentioned in Lee’s guilty plea.
The criminal court document charging Lee with conspiracy and securities fraud, which was made public on Nov. 5, says he had 12 accomplices, including several in Asia who worked at technology companies. The document doesn’t identify the individuals or the companies. Lee didn’t do so at his guilty plea either.
“From at least 2007 until March 2009, I along with others engaged in insider trading in the course of managing certain hedge funds,” Lee told the judge at his plea. “I would obtain inside information from people who worked at a number of publicly traded companies. I then used that information and shared that information with other hedge fund managers.”
“At times, I paid for the information,” he added.
One of Lee’s sources was an employee at Market Street Partners, a San Francisco-based investor relations consulting firm that did work for Google Inc., according to a Securities and Exchange Commission complaint. That person, who hasn’t been charged, is Shammara Hussain, according to a person familiar with the matter.
Far and Lee also made trades based on inside information allegedly provided by Ali Hariri, a vice president at a Santa Clara, California-based semiconductor company, Atheros Communications Inc., according to authorities.
The case is U.S. v. Lee, 09-cr-972, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporters on this story: David Glovin in New York federal court at dglovin@bloomberg.net; Linda Sandler in New York at lsandler@bloomberg.net.
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