Circle of Friends: The Massive Federal Crackdown on Insider Trading---and Why the Markets Always Work Against the Little Guy

by Charles Gasparino

Overview

The bestselling author of The Sellout tells the explosive story of the government’s crackdown on insider-trading networks—an investigation that has already racked up more than 60 convictions.

In Circle of Friends, award-winning journalist Charles Gasparino—one of Wall Street's most knowledgeable observers—follows government investigators and prosecutors as they pursue one of the most aggressive and broad-reaching series of insider-trading cases in the nation's history. A richly textured page-turner of investigative journalism based on extensive reporting, Circle of Friends chronicles the massive federal crackdown that has already put some of the biggest names on Wall Street behind bars, including Raj Rajaratnam, founder of the Galleon Group, and Rajat Gupta, a former CEO of consulting giant McKinsey & Co. Other similarly sized targets are still waiting nervously, including the biggest one of them all—financial impresario Steve Cohen of SAC Capital, the giant hedge fund that has confounded regulators for years by cranking out a steady stream of market-busting returns.

Gasparino goes behind the headlines to reveal how the government makes its case, using every tool at its disposal—and at great expense to taxpayers—to supposedly make the investing world safer for average Americans. Gasparino asks why federal officials are so eager to prosecute these cases: What is the real damage to individuals? Do average investors really care? He explores why insider trading is all the rage these days when the U.S. government has failed to bring a single criminal case against the culprits who caused the 2008 financial crisis.

Circle of Friends is not a defense of insider trading, but it does offer an account of the politics of Wall Street crime fighting, revealing the behind-the-scenes ambitions that motivate headlines and burnish political careers.

A riveting work of narrative nonfiction, as engrossing and explosive as fictional thrillers of the finest magnitude, Circle of Friends is a wakeup call to the investing public.

Product Details

ISBN-13:	9780062096067
Publisher:	HarperCollins
Publication date:	07/02/2013
Pages:	369
Product dimensions:	6.52(w) x 9.10(h) x 1.26(d)

About the Author

Charles Gasparino is a senior correspondent for the Fox Business Network and the Fox News Channel, where he reports on major developments in the world of finance and politics. A former writer for the Wall Street Journal and Newsweek, he has also served as a columnist for the New York Post and The Huffington Post as well as a contributor to The Daily Beast, New York Magazine, and Forbes. Gasparino is a recipient of numerous business journalism awards, including the prestigious Investigative Reporters and Editors Award for The Sellout. His other noteworthy books include Blood on the Street and King of the Club.

Table of Contents

Introduction 1

1 Perfectly Legal 21

2 Ten Different Cameras on Every Trader 47

3 Do Whatever It Takes 71

4 A Regular Guy 85

5 What Friends Are For 99

6 Bigger Fish 121

7 The Flip 137

8 The Feds Might Be Listening 159

9 Odd Couples 175

10 Something Good Is Going to Happen 193

11 Pounce Hard 213

12 Never Let a Good Scandal Go to Waste 227

13 The Luckiest Men in Law Enforcement 247

14 Stevie Is Worried 265

15 Harpooning the Whale 291

Cast of Characters 323

Notes 331

Index 347

Editorial Reviews

Prostitution is said to be the oldest profession, but insider trading must top the list of world's oldest white-collar crimes. Bestselling author and Fox News correspondent Gasparino's book is a true account of economic corruption that reads like a thriller. He constructs a story of crime and punishment, filled with larger-than-life personalities and their comrades in federal law enforcement. The fast-pace narrative and Gasparino's beat-on-the-street writing aside, the book examines insider trading from conception to its potential effects on society. The author's main incentive is in revealing the politics of federal prosecution of crime. He goes deep inside the government's investigation, providing new perspective on regulators exaggerated view of insider trading, arguing ulterior motives. According to Gasparino, the 2008 collapse of the economy was not caused by such petty offenses. Readers are left wondering, why is the government avoiding the more major crimes on Wall Street? Agent: Scott Shuster, Zachary Shuster Harmsworth Literary Agency (July)

Publishers Weekly

’Circle of Friends’ is an insightful recap of how we got to the place where insider trading became the favorite target of regulators, and is a good guide on where it all goes from here as investigators continue to pursue SAC Capital Advisor’s Steven A. Cohen.” — New York Post

“Circle of Friends reads like a page-turning thriller.” — Connecticut Post

From the Publisher

Circle of Friends reads like a page-turning thriller.

Connecticut Post

’Circle of Friends’ is an insightful recap of how we got to the place where insider trading became the favorite target of regulators, and is a good guide on where it all goes from here as investigators continue to pursue SAC Capital Advisor’s Steven A. Cohen.

New York Post

’Circle of Friends’ is an insightful recap of how we got to the place where insider trading became the favorite target of regulators, and is a good guide on where it all goes from here as investigators continue to pursue SAC Capital Advisor’s Steven A. Cohen.

New York Post

10/15/2013
It is hard to imagine that insider trading was once legal. The security laws of 1933 and 1934 outlawed the practice, and it would be another 50 years before the Securities and Exchange Commission (SEC) used these laws to go after those involved. Gasparino (senior correspondent, Fox Business News; Blood on the Street; King of the Club) offers here a rare, inside account of how the FBI, the SEC, and the U.S. Department of Justice pursue insider traders—the circle of friends of the title—focusing on those at the bottom of the pecking order to get them to flip those higher up. Gasparino relates how Raj Rajaratnam of Galleon Group was convicted for insider trading and how SAC Capital is facing SEC charges for failing to prevent the practice. The author provides an in-depth look of the Rajaratnam investigation, profiling key players involved. Although the Cohen investigation is also discussed, no final outcome is given, as the trial has not occurred. The author shows that some of the tactics the FBI and the justice department use—bullying and intimidating people into testifying—are no better than those of the criminals they pursue. VERDICT For libraries that have a strong business collection and patrons with an interest in insider trading crimes.—Michael Sawyer, Pine Bluff, AR

Library Journal

A senior correspondent for Fox Business Network profiles the ongoing insider trading prosecutions that have secured convictions for more than 70 hedge fund traders. Gasparino (The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System, 2009, etc.) describes his book as "an attempt to provide some perspective on what regulators view as the white-collar crime of the century." He details the investigations that have ensnared such multibillion-dollar outfits as Raj Rajaratnam's Galleon hedge fund and are closing in on Steve Cohen's huge SAC Capital. Hedge fund managers cite their use of the "mosaic theory of investment," careful research, expertise and skill in putting together profit-making analysis as the reasons for their consistently outsized returns. Federal investigators insist they come from an illegal edge over public investors and aim to level the playing field. Gasparino demonstrates that their charges are credible, showing teams from the Manhattan U.S. Attorney's Office, the SEC and the FBI persuading juries with good detective work, undercover informants and wiretaps. The author's presentation of the succession of these cases, as well as those against the research firms that provided tips to the big players, is detailed and well-written. He provides perspective with a history of insider trading going back to the 1920s, covering the evolution of laws against insider trading under the Roosevelt, Kennedy and Reagan administrations. (Major prosecutions of Ivan Boesky and Michael Milken took place in the 1980s.) After discussing whether insider trading should be a crime, Gasparino raises the question of proportionality, juxtaposing hedge fund prosecutions with the examples of banks and bankers deemed too big to prosecute, even though their conduct led to the economic collapse of 2008. A thoughtful, provocative investigation and assessment.

Kirkus Reviews