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Former Jefferies Money Manager Indicted for Insider Trading

Joseph Contorinis, a former managing director at Jefferies, has been charged with a $7 million insider trading scheme.

The prosecutorial team that's been vigorously pursuing Wall Street insider trading cases and recently rounded up 20 suspects in the Galleon hedge fund case — Preet Bharara, the U.S. Attorney for the Southern District of New York, and Joseph M. Demarest, Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation — have announced an indictment in a case the SEC brought in February.

On Friday, Bharara and Demarest indicted Joseph Contorinis, former managing director at Jefferies & Company and portfolio manager for the Jefferies Paragon Fund, on charges of conspiracy and securities fraud relating to $7 million in profits he allegedly made for the hedge fund through insider trading. Contorinis, who lives in New YorkCity, is expected to be arraigned in Manhattan federal court by U.S. District Judge Richard J. Sullivan on November 12, 2009 at 12:30 p.m.

The SEC charged Contorinis, along with six other people, with insider trading in February in a ring that allegedly generated more than $11.6 million in illegal profits and avoided losses.

According to the District Attorney's complaint, from 2004 through June 2006, Contorinis, then a portfolio manager of a hedge fund at an investment advisory firm, executed securities trades based on material, non-public information about mergers and acquisitions that he received from Nicos A. Stephanou, who was working as an investment banker in New York and London, England.

The prosecutors say Stephanou and Contorinis had a close personal friendship, but that Contorinis knew that Stephanou was tipping him in violation of Stephanou's duty of confidentiality to his employer and its clients. For example, from late 2005 through early 2006, Stephanou was on the investment banking team representing a private equity firm that was interested in acquiring Albertson's Corporation. During the course of the transaction, Stephanou tipped Contorinis about positive and negative developments on the deal, and Contorinis executed trades based on that information, Bharara and Demarest say. As a result of this illegal trading, Contorinis allegedly made profits exceeding $7 million for his hedge fund.

In May of this year, Stephanou pleaded guilty to six counts of conspiracy to commit securities fraud and one count of securities fraud and he awaits sentencing.

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