FBI Arrests NVIDIA and Dell Employees, Insider Trading Scandal Escalates

Santa Claus would have probably not visited Dell and NVIDIA this past Christmas if he knew that NVIDIA and Dell hadn't been all that good.

The US Federal Bureau of Investigation (FBI) has arrested several Dell and NVIDIA employees on charges of having participated in insider trading.

FBI arrested seven men in total, who allegedly “knew ahead of time which way the stock in Dell or Nvidia would move once quarterly earnings figures were officially announced.”

The information exchanged between them helped placing successful bets on the company stocks.

With court authorization, the FBI uncovered various instant messages, e-mails and phone calls that the defendants sent or received.

The formal press release says that on-time Dell employee Sandy Groyal worked with Jesse Tortora, Danny Kuo (who had an insider at NVIDIA) and Jon Horvath.

The so-called conspiracy that they practically led ended up bringing illegal profits of over $60 million.

“Goyal had the direct connection to the Dell Insider. Goyal passed along Dell quarterly earnings information to Tortora and defendant Todd Newman at Hedge Fund A,” said Janice K. Fedarcyk.

“In compensation for this, Tortora and Newman arranged to pay Goyal a total of $175,000 in 2008 and early 2009, using “soft dollars” and an intermediary to conceal the deal. Hedge Fund A reaped $3.8 million in illegal profits from advance knowledge of positive Dell news for the first quarter of fiscal year 2008 and negative news for the second quarter.”

Operation Perfect Hedge is the bureau's systematic targeting of insider trading in the hedge fund industry.

This movement begun about four years ago and has already led to the arrest of 60 people.

“When you have the answer sheet beforehand, it’s pretty hard not to ace the test. But cheating on the test and getting away with cheating on the test are two different things,” Janice K. Fedarcyk stated.

“More than 60 people have been charged in “Perfect Hedge” to date, and this initiative is far from over.”