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More on the Moore Capital raid

Robert Peston | 17:50 UK time, Tuesday, 23 March 2010

My disclosure that the London offices of Moore Capital were raided by officials from the Financial Services Authority and the Serious Organised Crime Agency this morning will send shock waves through the City of London and Wall Street.

Although no-one has yet been charged, a Moore Capital employee has been arrested.

And the Financial Services Authority has described its probe as its "largest-ever operation against insider dealing" - involving almost 150 investigators and policeman in a swoop on 16 addresses in London, Oxfordshire and the south-east of England.

There is no suggestion of wrong-doing by Moore or its legendary founder, Louis Bacon.

But there are few hedge funds in the world that have been going for longer or that manage more money.

It is thought to manage some $15bn of investors' money.

And Mr Bacon is said by Forbes Magazine to be worth $1.5bn.

The FSA massively increased the resources it deploys on surveillance and enforcement three years ago - and with the probe of Moore, it is showing a willingness to probe the world's most powerful financial firms.

Update 18:27

Deutsche Bank, the leading German bank with a huge City presence, has confirmed that one of its employees is under investigation by the FSA. It is co-operating with investigators.

Meanwhile a spokesman for Moore Capital tells me that its arrested employee has been put on gardening leave and that it too (naturally) is fully co-operating with the FSA.

Moore Capital's understanding is that the FSA is probing private dealings by the trader, rather than trades for the firm. If true, that would limit the reputational damage to the firm.

Update 19:00

The third financial institution raided today was the London arm of the big French bank, BNP Paribas.

For the avoidance of doubt, the FSA is investigating individuals at Moore Capital, BNP Paribas and Deutsche Bank rather than the firms themselves.

Comments

  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    Well, maybe these companies will begin to reassess exactly how much of a liability their own staff can be, especially since they obviously find big money to be so rewarding - if they didn't do their jobs for the money, they'd be doing something far more cuddly and heart warming, something far more beneficial to society.

    Rewards for jelly babies, chocolate or being allowed to stay up late to watch the telly just never seem to cause so much worry, do they!

    Even should the employee be found to be innocent, the company will suffer in terms of reputation.

  • Comment number 3.

    Sorry Robert, last post from me. I can no longer stand the time delay caused by woeful moderation.

    Good luck all.

  • Comment number 4.

    Someone has been caught with their hand in the till. A big profile case that will cost the tax payers millions, a slap on the wrist for that someone, six months later he (like the rest of them) is back doing it again. Well more waste, it a good job there is no poverty in this country, how would we be able to afford all this?

  • Comment number 5.

    Whoopee - they'll never find a jury smart enough to figure out if they are guilty or not, and if they did they wouldn't server time. We need to outsource the investigation to the US, the trial and sentencing to China, and, assuming they escape the death sentence, the prison term to Somalia - heck we might even be able to do a trade deal whereby Somali Pirates stopped pirating UK vessels and we outsource our prisoners

  • Comment number 6.

    I would need a book to tie all these investigations together, but let it be said that I believe the chips are beginning to fall.
    Louis Moore Bacon is an AMERICAN hedge fund manager and trader. His worth is estimated at @ $1.7B and he is ranked by Forbes as the 707th richest person in the world. He is the manager of a leading NEW YORK CITY-BASED HEDGE FUND: Moore Capital Management.
    Bacon started as a trader and broker of financial futures for SHEARSON LEHMAN BROTHERS in New York. In 1986 he founded Moore Capital Management, a leading hedge fund with $15B in assets. Moore Capital is headquartered in NEW YORK CITY but it has offices in London and Washington D.C.
    While FSA said this was its biggest insider-trading investigation, it has already arrested persons previously (8 people in July 2008, including former employees at JP Morgan Cazenovia Ltd. and UBS AG’s London offices).
    Opposition Conservative lawmakers have threatened to abolish the FSA should they win this year’s election, which must be held by June. What would they replace the FSA with when things are just beginning to stew?
    The FSA was carrying on as usual in the face of the Conservative lawmakers’ plans to abolish it.

    Back to previous stuff, a plea bargain was given to a witness in the FSA’s case against Malcolm Calvert, the former Cazenove partner who received a 21-month sentence earlier this month. Everything seems to have broken around Galleon. Since the Galleon case, chips have been falling.
    Former Atheros Communications Inc., Vice President Ali Hariri became the 10th person to plead guilty in the Galleon Group LLC insider-trading case.
    Hariri was arrested in November. Hariri is among 21 people charged in two overlapping insider trading cases. Raj Rajaratnam, Galleon Group’s founder, was indicted for using confidential tips to earn millions of dollars in illegal stock trades.
    These were default swap contracts - a sort of gambling, where the customer gambles based on his broad credit rate opinion against the bank with its highly developed calculation models, but the customer doesn’t know that. Deutsche Bank has been involved in several lawsuits filed by German local governments, community-owned utilities and companies that claim the bank didn’t adequately disclose risks when it sold swaps. In December, the city of Hagen settled its case against Deutsche Bank after an appeals court said it was likely to dismiss it.
    In other words, things are just beginning to heat up and at the bottom of the fire you will find derivatives, credit default sweaps, short selling...and all the other things that American banks do not regulate.

  • Comment number 7.

    Mr Peston wrote:
    'Moore Capital's understanding is that the FSA is probing private dealings by the trader, rather than trades for the firm. If true, that would limit the reputational damage to the firm'

    It would limit the reputational damage to what:
    'They employee people engaged in fraud'

  • Comment number 8.

    People working in a corrupt environment (banking) tend to feel they can get away with corrupt actions and they usually can. Small change compared to the scheme of a couple of years ago but nobody will be held responsible for that...those were the really big boys and can't touch them without involving the political gate-keepers. Change the banking regulations......you would think at some point in time the legislative bodies might get the message. Present Parliment during WWII: "bombs...what bombs?"

  • Comment number 9.

    Oh, the good sheriff caught one bankster! Let's see what the judge makes of the scapegoat!

  • Comment number 10.

    I find Robert Prestons delivery and affectation so off-putting I dont listen to what he is saying.

  • Comment number 11.

    Go comapare, go compare....thank your lucky stars that you went to go compare!

  • Comment number 12.

    Update 1707: I understand that the hedge fund raided by the FSA and SOCA this morning was Moore Capital.

    ----------------

    Moore Capital...how ironic!

  • Comment number 13.

    Update 19:00

    The third financial institution raided today was the London arm of the big French bank, BNP Paribas.

    For the avoidance of doubt, the FSA is investigating individuals at Moore Capital, BNP Paribas and Deutsche Bank rather than the firms themselves.

    -----------------------

    At least they're all foreign eh!

  • Comment number 14.

    I find it bizarre that quite so many readers of this blog don't know the difference between a banker and a market trader.

  • Comment number 15.

    One has to wonder whether the raids have been staged at a time when airtravel is difficult in order to avoid the criminals fleeing.
    Flawed logic however.
    We dont have prison places for them anyway.
    Bring back the prison hulks. Either side of the Thames barrier would do.

  • Comment number 16.

    Robert:

    I am glad, that you are doing your hardest regarding the reporting on
    this sensitive story about the raids at the financial institutions....

    (All parties are presumed innocent until proven guilty)

    [Dennis Junior]

  • Comment number 17.

    A simple crime would get 1 to 5 years inside. A banker, or trader in this case, will get a complex trial and no time.......
    One crime for us all, one for the trader/banker?

    If the money is cash, all hell breaks loose, if the money is in a system, all hell becomes a trial too complex for a juror.

    Once again I am confused with life.

  • Comment number 18.

    Insider trading is notoriously difficult to prove. The outcome will be interesting. This shouldn't change anyone's views of FSA. Come 7 May we should surely wave them goodbye.

  • Comment number 19.

    #7 Dempster


    Best post I've read all night, brilliant.

  • Comment number 20.

    Dempster

    I agree with Bob-excellent post!

    Would also like to say that I have grown increasingly cynical over the last couple of years, I am waiting for some MP's to be listed as arrested.

    The optimist in me wishes that some sleazy banker was in on this insider trading-there are quite a few I'd relish seeing handcuffed in a dock!

    Just a thought, but was anyone unaccounted for in Parliament today? What about bankers or ex bankers suddenly vanishing?

    Not a vindictive person by nature, but I'll be having sweet dreams tonight!

  • Comment number 21.

    To Bob Rocket and Tigerjayj

    Thank you. I thought post No.1 was better though.

  • Comment number 22.

    Dempster

    #1 must have been very good as it got zapped into the modosphere!

    Sadly, my imagination must fill in the gaps!

  • Comment number 23.

    What's the matter with these people aren't they rich enough?

    In an environment where the borderlines of what is corrupt are constantly being challenged it's hardly surprising that "clever" people seek to go that one step further. They hope that they won't get caught.

    Is it the way of business or Capitalism or just of human nature that causes people to cheat on a grand scale? The working environment of these people will set great store by being top of the tree. As they all know this, they will all also know that cheating will be on their minds, (even if not everyone carries out such activities.)

    But when the presupmtion is made that people are basically honest (or in the case of MP's Honourable as well as honest?) and do not need to be overly regulated that's when they take advantage, not surprisingly.

    When a "benefit cheat," cheats, he/she has broken the law and faces jail. When an MP cheats it, it was within the rules, but on reflection they'll "reform" the rules and pay it back (after an enquiry,) but may resign. And when a Banker cheats, it was against the self-regulation rules, but it was OK because he/she was trying to make money "and there's no law against that."

    Yet many people still insist this Capitalistic environment is better, that it is "better than ALL the alternatives." Even if it means everyone living in an environment of MASS cheating? Such people need therapy!

  • Comment number 24.

    23. At 09:56am on 24 Mar 2010, spareusthelies

    Haven't you noticed that those who insist the Capitalist system tends to be championed by those who pay no penalty for it? Why would they complain if they can do whatever they want and get to kick the poor guy in the gutter?

  • Comment number 25.

    Wherever there is serious money involved, there always will be corruption amongs individuals, whether they be bankers, traders, MP`s, or business employees.

    One way to curb corruption would be to `lead by example` ie. for our `leaders`? to treat severely those amongst their own kind; there has been no real evidence of this to date.

    Surely it is the system that needs to be altered and I would start by reducing members of both Houses - and by definition all the costly associated administrative support. The US, population circa 300m, has 100 Senators. The UK, population 60m, supports 646 MP`s, plus the House of Lords. Res ipsa loquitor.

    Such action may persuade some of those in the private sector to think twice. Now is the time for action.

  • Comment number 26.

    24. At 10:58am on 24 Mar 2010, copperDolomite wrote:

    "23. At 09:56am on 24 Mar 2010, spareusthelies

    Haven't you noticed that those who insist the Capitalist system tends to be championed by those who pay no penalty for it? Why would they complain if they can do whatever they want and get to kick the poor guy in the gutter?"

    Funnily enough, Yes! But also by those who do pay a penalty for it, at the moment, but go along with things anyway because they aspire to be in a position to pay no penalty eventually. These days we're meant to envy such people, being referred to as "on the way up!"

    I wonder if I'm right in saying that, given enough time and taken to its extreme, the point of capitalism is for everything to be owned by just one person? (After all, ownership of profit, capital, land etc are what it's all about, it's just a case of who?)And this is a good thing for humanity?

    Look how it makes people behave. Why deny it?

  • Comment number 27.

    'For the avoidance of doubt, the FSA is investigating individuals at Moore Capital, BNP Paribas and Deutsche Bank rather than the firms themselves.'

    It wasn't Israel which was behind the Dubai hit, it was Israelis pretending to be other than they were. As ever, it comes down to plausible deniability and the fact that we have a systemic problem, which has been growing like Topsy for years. This is why it's so hard to do anything about. Blaming individuals is not the solution, but do we have the collective will to change the entire system and go 'Socialism with Chinese Characteristics' as the alternative to Islamic Fundamentalism (both of which proscribe this endemic behaviour)? I fear not.....

  • Comment number 28.

    Re: 25

    Its a common misconception that the 'Government' of the USA consists solely of the 100 Senators and 432 Congressmen at the Federal level.In reality most 'governing' is done by the individual states through their own legislatures that are mainly based on the federal one. To give an example, Pennsylvania by itself has 203 state congressmen and 50 senators. The total across all of the states is 1,942 Senators and 3962 Congressmen all(literally) have to be paid for by the taxpayers in each state on top of the Federal 'elite'...Our system seems somewhat under represented by elected officials compared to that!

  • Comment number 29.

    > My disclosure that the London offices of Moore Capital were raided
    > by officials from the Financial Services Authority and the Serious
    > Organised Crime Agency this morning will send shock waves through
    > the City of London and Wall Street.


    A shock wave is a type of propagating disturbance, say between jostling atoms in a hot, pressurised environment. One way to prevent shock waves is to cool the environment to phenomenally low temperatures.

    That's exactly what should happen to the City of London and Wall Street.

  • Comment number 30.

    >25. At 11:19am on 24 Mar 2010, Dunningham wrote:

    The US, population circa 300m, has 100 Senators. The UK, population 60m, supports 646 MP`s, plus the House of Lords.


    100 Senators.
    And the President.
    And Vice-President.
    And 436 Congressmen.
    Plus 538 Electors.
    Plus each individual state's legislative bodies- ranging from 49 to 424 per state (about 7000 in total, I lost count).
    And the District of Columbia's equivalent.

    Then they have county and city bodies just as we do.

    So around 8,000 for 300M, or 1 per 37,500

    Whereas we have

    646 MPs
    733 Lords
    129 MSPs
    60 Welsh Assembly
    and 1 (AFAIK) minister without portfoilio

    So 1569 for 60M, or 1 per 38,250


    We could reduce the administration costs far more efficiently by having assigned offices and staff for each constituency in appropriatly protected buildings- as they do in most countries- instead of the haphazard hotch potch of running whatever office space you manage to be able to rent via an expenses system!

  • Comment number 31.

    29. Jacques Cartier 'A shock wave is a type of propagating disturbance, say between jostling atoms in a hot, pressurised environment. One way to prevent shock waves is to cool the environment to phenomenally low temperatures.

    That's exactly what should happen to the City of London and Wall Street.'

    It won't happen. There isn't the will or the means to do it. :-(

  • Comment number 32.

    29. Jacques Cartier:

    I like the idea of sending shock waves through the city. A series of really big ones.

    And we have all these expensive Trident submarines floating around, just gathering barnacles. . .

  • Comment number 33.

    The problem for any small investors trying to make money from investing in the stock market is assymetric information. People are making money because they know more than you do - just like a card sharp does.

    The only information I use now to trade the markets is trend following - the trend is your friend and you can stop listening to all the gossip, rumours and other nonsense that surround the markets.


 

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