To Catch A Trader - To Catch a Trader...

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To Catch a Trader
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To Catch a Trader Summary of “To Catch a Trader” The documentary “to Catch a Trader”, a 54 minute video part of the PBS Frontline Series, was aired in 2014 to inform people about the ongoing seven-year investigation by the government to crackdown on insider trading. The film features a video of the hedge fund titan Steven A. Cohen, sole owner of SAC Capital. It also includes incriminating FBI wiretap of traders, interviews with both Wall Street and Justice Department insiders. Hedge funds, which is an investment company that pools capital from a number of investors and invests in securities and other instruments, was at the center of some rumors. Even though they have been around for decades, it was not until the ‘90s that they became very popular. It began when some guys decided they did not want to put up with the politics of big investment banks so they created the hedge fund companies. The growth of the assets of this companies such as SAC Capital, as shown in Appendix A Figure 1 were incredibly high. Steven A. Cohen went from being a small-time option trader to being one of the most successful hedge fund managers. He sounded the SAC Capital, a group of hedge fund advisors, and became a legend on Wall Street by generating some of the best returns. Many wonder how anybody makes 60 percent a year. Well one of the answers to that question is that Cohen charged 3 and 50, meaning 3 percent of assets under management and 50 percent of any gains. It did not take long before the government started getting suspicious. It all began with an article written by the Wall Street Journal that mention the hedge fund giant SAC Capital. Donald Longueil and Noah Freeman, former employees of SAC Capital panicked and began to get rid of incriminating information. After an investigation they were both caught on tape; Longueil and Freeman then plead guilty. Page 2 of 9
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To Catch a Trader The strategy was to get as much information as possible to have “edge”, which is knowing information legal or illegal that no one else knows, and be able to make money. The Galleon Group, a hedge fund made famous by its founder and CEO, Raj Rajaratnam, were paying informant for exchange of valuable information.
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