The trade on Wall Street is always about money. It just may not be the money you make today, rather the money you can make tomorrow. That seems to be the alleged motivation behind the latest insider trading case the Securities and Exchange Commission has brought – and the first case that touches the murky world of credit default swaps. The SEC alleges that Jon-Paul Rorech, a bond and CDS salesman at Deutsche Bank, passed along market sensitive information to Renato Negrin, a portfolio manager employed by hedge fund Millennium Partners L.P. and that Negrin used that information to trade in credit default swaps on non-public information about VNU, a Dutch media conglomerate. The information had to do with a bond offering.
The SEC complaint alleges that Negrin was able to book a profit of about $1.2 million from the tip and trade he made on VNU credit default swaps. How did Rorech allegedly gain? By solidifying a client relationship, the SEC complaint alleges, which is another way of saying he was hoping for future trading business from Negrin and Milennium to be thrown his way. He made some unspecified amount in commissions from Negrin’s trade.
There is a cloak and dagger aspect to this case – recorded phone calls the SEC got hold of which appear to contain information about the alleged illegal trading scheme. And the fact that the two often jumped off the “recorded” calls to speak on each others cell phones.
The $1.2 million is small potatoes in the scheme of illegal schemers. But it does send a message to people doing business in markets as opaque as credit default swaps – the financial cops have added a new beat to their rounds.
For the SEC press release and complaint, Click Here.