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, Charles Gasparino, the award-wining financial journalist and 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.
Similarly sized targets are still waiting nervously, including the biggest one of them all—the billionaire Steve Cohen, who is head of the giant hedge fund SAC that has confounded regulators for years by cranking out a steady stream of market-busting returns. Cohen is being pressed to testify, so far to no avail. But a trial date has been set in November for one of his former employees, Matthew Martoma, who is accused while at SAC of profiting, to the tune of more than a quarter of a billion dollars, from healthcare company trades using inside information.
These investigations, ending in successful prosecutions, began during the palmy days of 2007, when the market was at its height—before it would commence its disastrous fall as the subprime crisis kicked in.
In the subsequent wreckage, it became somewhat easier to identify abuses, which have unfortunately always been a part of the market and will continue to be, given the difficulty of defining exactly what insider trading is, and of trying to follow the tracks that perpetrators take great pains to cover up.
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 defence 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.
The seemingly unusual feature about many convicted of large-scale insider trading is that most of them are already wealthy, one hopes mainly through legitimate business dealings, and that the insider abuses we learn about contribute relative peanuts to their overall financial standing.
What is it then about such people that compels them to this behaviour? The rush of living on the edge? A sense of power? Simple arrogance? For all their brilliance and market power, those convicted appear to lack simple moral judgement, which creates a very dangerous situation.
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. It is interestingly documented and ultimately depressing in revealing the scale and intractability of a problem that one fears will continue, even more so as economies improve.
| Title | Circle of Friends: The Massive Federal Crackdown on Insider Trading—and Why the Markets Always Work Against the Little Guy |
| Author | Charles Gasparino |
| first published | March 6th 2012 |
| Publisher | HarperBusiness |
| ISBN | 0062096060 |
| Language | English |
