01/09/2011 Author: Will Wainewright

HFMWeek Daily Snapshot - 1 September

NEWSPAPERS AND WIRES
Former Galleon Group hedge fund trader Craig Drimal was sentenced to five and a half years in prison after admitting his part in an insider-trading scheme that stretched from technology firms to pharmaceutical companies, Bloomberg reports. Drimal pleaded guilty in April to six counts of conspiracy and securities fraud, admitting that he and others at Galleon traded on inside information obtained from lawyers working on transactions involving 3Com Corp and Axcan Pharma Inc. Drimal said the tips came from Arthur Cutillo and Brien Santarlas, lawyers at Boston-based Ropes & Gray.

Hedge fund Diamondback Capital Management, which had been embroiled in the government's insider trading case, has agreed to pay back roughly $1m to settle an insider trading case, according to a court filing released on Wednesday, writes Reuters. The Connecticut-based firm, which has not been accused of any wrongdoing, made the money after a former portfolio manager illegally traded on a tip that Axcan Pharma would be acquired.

The Securities and Exchange Commission said the assets of a Chicago-area money manager and his hedge fund were frozen, a move that stems from allegations they lied to prospective investors in their start-up quantitative hedge fund, reports the Wall Street Journal. The SEC alleges that Belal Faruki, of Illinois, and his advisory firm Neural Markets solicited highly sophisticated individuals to invest in the "Evolution Quantitative 1X Fund," a hedge fund they managed that supposedly used a proprietary algorithm to carry out an arbitrage strategy involving trading in liquid exchange-traded funds.

Half-year results released by BlueCrest, the $26.8bn hedge fund manager, have revealed year-to-date gains of near 2%. The company, BlueCrest AllBlue Fund Limited, made 1.99%, boosted by the performance of best-performing funds BlueCrest Capital International and BlueMatrix, which returned 2.64% and 3.32% respectively in the first six months. BlueCrest chairman, Richard Crowder, said: “With an uncertain backdrop trading strategies have faced a challenging environment where markets have been driven by political factors, often resulting in severe dislocations.”

David Simon, a well-known New York risk arbitrager, directed his $100m hedge fund firm, Twin Capital Management, to sue his wife and her divorce lawyers, writes Forbes. The claim is that they hacked into Simon’s computer to get their hands on the hedge fund’s highly-secret financial records and trade secrets. In a 15-page complaint filed in Manhattan’s New York state court earlier this week, Simon accuses his wife, Linda Simon, of hacking into a password-protected Twin Capital computer located in the Simons’ home and duplicating the hard-drive.

A top Goldman Sachs strategist has provided the firm's hedge fund clients with a particularly gloomy economic outlook and suggestions for how these traders can take advantage of the financial crisis in Europe, writes the Wall Street Journal. In a 54-page report sent to hundreds of Goldman's institutional clients dated 16 August, Alan Brazil – a Goldman strategist who sits on the firm's trading desk – argued that as much as $1trn in capital may be needed to shore up European banks; that small businesses in the US, a past driver of job production, are still languishing; and that China's growth may not be sustainable.