U.S. Securities and Exchange Commission
Litigation Release No. 21802 / January 10, 2011
SEC v. Robert Feinblatt, Jeffrey Yokuty, Trivium Capital Management LLC, Sunil Bhalla, and Shammara Hussain, Civil Action No. 11-CV-0170 (SDNY)
SEC Charges New York Hedge Fund Manager, Wall Street Professionals and Corporate Insiders in an Action Related to the Galleon Investigation
On January 10, 2011, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Southern District of New York alleging that Robert Feinblatt – a co-founder and principal of New York-based hedge fund investment adviser Trivium Capital Management LLC – and Trivium analyst Jeffrey Yokuty engaged in insider trading in the securities of Polycom, Hilton, Google and Kronos. The complaint charges Trivium with insider trading as well. The SEC further alleges that Polycom senior executive Sunil Bhalla and Shammara Hussain, an employee at investor relations consulting firm Market Street Partners that did work for Google, tipped the inside information that enabled the insider trading by Feinblatt and Yokuty on behalf of Trivium’s hedge funds for illicit profits of more than $15 million. The complaint filed today relates to pending enforcement actions, SEC v. Galleon Management, LP, et al., 09-CV-8811 (S.D.N.Y.) (JSR) and SEC v. Hardin, 10-CV-8600 (S.D.N.Y.) (JSR).
The SEC has now charged 27 defendants in its Galleon-related enforcement actions that have alleged widespread and repeated insider trading at numerous hedge funds including Galleon – a multi-billion dollar New York hedge fund complex founded and controlled by Raj Rajaratnam – and by other professional traders and corporate insiders in the securities of 14 companies generating illicit profits totaling approximately $69 million.
In the SEC’s complaint filed earlier today in federal court in Manhattan, the SEC alleges that Feinblatt and Yokuty traded on behalf of Trivium in connection with two corporate takeovers and two quarterly earnings announcements based on material nonpublic information that Feinblatt and Yokuty allegedly received from Roomy Khan, an individual investor who had, herself, received such information from various sources.
The SEC’s complaint alleges that Bhalla tipped Khan to inside information about Polycom’s 2005 fourth quarter earnings, and that Khan traded on that information and tipped others. The tippees included Feinblatt and Yokuty, who traded on behalf of Trivium based on the information. Bhalla also tipped Khan with inside information about Polycom’s 2006 first quarter earnings. Khan traded on the information and tipped Rajaratnam, who traded on behalf of Galleon based on the information. The SEC also alleges that Khan traded on and tipped Feinblatt and Yokuty among others with inside information that Khan received from a Moody’s rating agency analyst about an impending takeover of Hilton by The Blackstone Group. Feinblatt and Yokuty then traded on behalf of Trivium based on the information.
The SEC further alleges that Hussain tipped Khan among others with inside information about Google’s 2007 second quarter earnings. Khan traded on the information and also tipped Feinblatt and Yokuty, who traded on behalf of Trivium based on the information. The SEC also alleges that Khan traded on and tipped Feinblatt and Yokuty among others with inside information that she received about the impending acquisition of Kronos by Hellman & Friedman. Feinblatt and Yokuty then traded on behalf of Trivium based on the information.
The SEC’s complaint charges the defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and, except for Bhalla, with violations of Section 17(a) of the Securities Act of 1933. The complaint seeks a final judgment permanently enjoining the defendants from future violations of the above provisions of the federal securities laws, ordering them to disgorge their ill-gotten gains plus prejudgment interest, and ordering them to pay financial penalties. The complaint also seeks to permanently prohibit Bhalla from acting as an officer or director of any registered public company.
In addition, since the Galleon-related cases were filed, the SEC has:
For further information, see Litigation Release Nos. 21255 (October 16, 2009), 21284 (November 5, 2009), 21397 (January 29, 2010), 21493 (April 20, 2010), 21526 (May 17, 2010), 21732 (November 8, 2010), and 21740 (November 15, 2010).