A hedge fund based in London set up a "dirty-tricks unit" to manipulate share prices and get illicit information on companies in an attempt to make millions on the stock market, an insider has revealed.
Private detectives were allegedly employed to hack into executives' emails and telephone records.
Front companies were set up to allow the hedge fund traders to pose as independent researchers or journalists.
Negative information on companies was then distributed to leading investment banks in the hope that rumours would spread and some share prices would fall.
The hedge fund, which cannot be named for legal reasons, stood to make millions from "short-selling" the shares as they fell in value.
The document alleges that:
- Employees of the hedge fund ordered an American-based private detective to hack into the corporate email systems of two firms in which the hedge fund had an interest.
- A bogus firm — with a phoney internet address — was established to allow employees to pose as independent researchers and approach company executives to garner information on their firms' future financial prospects. The firm was also used to gain access to industry conferences.
- A false website — with a bogus address — was also registered to allow hedge fund traders to pose as journalists. The offices of American politicians were approached by people claiming to be journalists to obtain information about potential new laws banning internet gambling that would hit British firms.
- Jurors and their families in a sensitive legal case into whether a firm had exclusive patent rights in which the hedge fund had invested were "tapped up". Money was allegedly paid to jurors' families for information about jury-room deliberations.- Hedge fund staff gathered "sensitive" negative information on firms in which they had an interest in the share price falling. This information was distributed to leading investment banks whose experts were encouraged to take a dim view of the prospects of the company's shares. A German "media consultant" was also used to disseminate information.
- A safe containing large amounts of cash was installed in the hedge fund's office. Money was paid to "sources" providing valuable inside information. On one occasion, an anonymous informant was paid $50,000.
The hedge fund at the centre of the allegations has offices in London's West End and traders spent their staff Christmas party on a luxury cruise.
It was set up by former senior executives from a blue-chip investment firm. However, from 2005, the "dirty-tricks unit" was staffed by former corporate investigators and investigative journalists hired from newspapers.
A hedge fund and the modern day version of bank robbery
The Telegraph out of London has this fascinating story about how a hedge fund spread rumors to aid in short selling. Pretty interesting stuff. Scandals are always been part of the street.