By Charlie Gasparino

Federal law enforcement officials say they have at least five years worth of insider-trading cases in the pipeline, a tally that could lead to hundreds of additional arrests in what’s already the largest probe of its kind, the FOX Business Network has learned.

This broad conclusion being reached by officials at the Securities and Exchange Commission, the US Attorney’s office for the Southern District of New York and the Federal Bureau of Investigation is the result of numerous interviews conducted by the FOX Business Network in recent weeks with senior law enforcement officials directly involved in the investigation.

The current investigation — which traces its roots to an SEC inquiry in 2007 and FBI agents gaining court approval to use wiretaps to snare targets — has resulted in 66 people being charged with insider trading and related crimes, and 57 convictions, the largest crackdown on insider trading in modern law enforcement history.

But law enforcement officials interviewed by FOX Business say the investigation is far from over and will get much larger in the years to come. According to these officials:

–They have “scheduled out” cases for the next five years, meaning that the use of wire taps and informants have netted far more cases than they had originally thought.
–Though it’s difficult to predict future case loads, law enforcement officials are in general agreement that “hundreds” of additional people could be charged in the years ahead. “In five years, we can easily see hundreds of people arrested and charged,” another senior law enforcement official told FOX Business.
–Law enforcement officials say they expect to charge another major figure in the hedge fund business, someone at the level of Raj Rajaratnam, the former founder of the giant Galleon Group hedge fund, before the inquiry is concluded. Officials declined to provide names of potential targets, but some of the big hedge funds that have received subpoenas in the probe include SAC Capital, run by Steve Cohen, and Ken Griffin’s Citadel Investments.

Continue to FoxBusiness

New York-based law firm Sadis & Goldberg has named two new partners—Mitchell Taras and Alexis Gelinas.

Taras is a member of the firm’s corporate and real estate group while Gelinas joins the tax group in the firm’s New York office.

Taras represents clients in a variety of complex real estate transactions, including acquisitions, dispositions, financing and construction. On the corporate side, Taras counsels proprietorships, franchisees and other closely held businesses in their day-to-day operations. He also has extensive experience in structuring, negotiating and implementing various business transactions.

Gelinas focuses principally on providing tax advice to investment managers of hedge funds, private equity funds, and other investment funds. He also provides tax advice to U.S. pension funds, sovereign wealth funds and other U.S. and foreign institutional investors in connection with their investments in private equity funds, hedge funds and U.S. joint ventures. In addition, Gelinas has extensive experience with respect to the “plan assets” and other ERISA regulatory issues.

“Alex’s substantial tax and ERISA experience will broaden and deepen our bench in these areas and will be a vital part of Sadis & Goldberg’s strategic growth,” said Steven Etkind, head of the tax group at Sadis & Goldberg.

FINalternatives

LightSquared, the broadband wireless company backed by Philip Falcone’s Harbinger Capital hedge fund will cut its workforce by 45%.

“This and other cost savings measures will allow LightSquared to continue to navigate the regulatory process as it works with the appropriate government agencies to find solutions to the GPS interference issue and bring its $14 billion privately funded wireless broadband network to more than 260 million Americans,” said the company in a statement published by Reuters on Tuesday.

Lightsquared, headquartered in Reston, Va., employs 330 people.

The Federal Communications Commission last week said it would block the rollout of LightSquared’s planned network, citing tests showing that it interferes with global positioning systems. Harbinger and LightSquared dispute those findings and pledged to continue to work towards a solution.

Falcone has said the firm is not considering bankruptcy.

[FINalternatives]

By Laurence Fletcher

Investor demands to pull out of hedge funds rose from an all-time low last month but remain at a historically subdued level, data from hedge fund services firm GlobeOp shows, in a sign investors are not deserting the sector despite last year’s mediocre returns.

The GlobeOp Forward Redemption Indicator, a monthly snapshot of clients giving notice to withdraw their cash as a percentage of GlobeOp’s assets under administration, was 3.14 percent in February.

This was up from an all-time low of 1.85 percent last month, although there tend to be more exit requests in February as investors rejig their portfolios in preparation for a key hedge fund redemption date at the end of March.

A year ago the indicator measured 3.36 percent, while in February 2010 it was 4.63.

“February continues the recent trend of very low redemption levels,” CEO Hans Hufschmid told Reuters.

By far the biggest jump in new redemption requests was for funds offering an exit in the next one to two months, where 2.26 percent of investors asked for their money back.

Continue to Reuters

By Laurence Fletcher

Lansdowne Partners, one of Europe’s biggest hedge fund firms, is to rename its flagship $7.5 billion UK Equity fund, reflecting its overseas investments and allowing it to invest in emerging markets, a source close to the firm told Reuters.

The fund, run by Stuart Roden and Peter Davies, will be renamed the Lansdowne Developed Markets fund in April.

The portfolio has already been investing about half its assets outside the UK, including taking large stakes in U.S banks, and will now be able to put up to 10 percent in emerging markets, although there are no immediate plans to do this.

Lansdowne, headed by Paul Ruddock, manages around $12.5 billion in assets and is well known for making millions shorting Northern Rock during the financial crisis prior to the stricken bank’s collapse.

More recently it has been betting on a recovery in some bank stocks, including Lloyds, although last year it sold its $850 million stake in Goldman Sachs.

[Reuters]

I think we need to talk about our relationship.

A study conducted by two well-regarded management consulting and operational outsourced services firms, SEI and Greenwich Associates, revealed the following:

“Institutional investors continue to deepen their commitment to hedge funds, but expect much more from managers in terms of articulating their value proposition, risk mitigation methodology, and performance expectations…”

Accredited wealthy and institutional investors remain committed to hedge funds even in the face of lackluster and sometimes pretty lousy results in 2011 (please refer to HedgeFundsX for our coverage of 2011 year end hedge fund performances).

Due in part to disappointing returns investors are now demanding more discussions, transparency and openness from the hedge funds.

“Investors remain committed but there’s a caveat,” said Phil Masterson, who is in charge of investment manager services at SEI. “The performance expectation is the most significant challenge managers’ face.”

Masterson highlighted investor concerns”… performance … has been less than stellar.”  He wondered how long the trust will remain.  “Is that benefit of the doubt running out?”  Masterson asked.

As in a relationship, communication and transparency is vital.  For investors that are deeply committed into a relationship in which they generally pay fees of 2% of assets under management and 20%  in fees on profits,  having an open and frank conversation regarding their relationship seems paramount.

Nearly 70% of the investors surveyed said they wanted hedge fund managers to communicate with them monthly.

“It’s absolutely critical for managers to differentiate themselves by articulating their investment strategies,” said Mr. Masterson, adding that hedge fund managers could also improve their position by ensuring they understood what investors really wanted, “what are their investment objectives, what is their risk profile”.

“Communication, transparency and operational quality are really going to be prerequisites,” said Mr. Masterson.

The study did not address if investors were upset that hedge funds didn’t compliment their new cute outfits purchased just for their meetings or the fact that hedge funds didn’t notice all the weight they lost.  It’s not known if after reading the results and having the talk; hedge funds bought the investors jewelry or took them to a nice dinner and vacation to strengthen the relationship.

By Sarah Limbrick

City high-flyer Fahim Imam-Sadeque is suing former employer BlueBay Asset Management in a row over what could be the world’s most expensive lunch.

He stands to lose $1.7million after emailing a colleague to invite him for a meal, according to a High Court writ.

He says BlueBay misconstrued the email and accused him of trying to poach staff while he was waiting to leave the company. As a result, BlueBay decided hold back $1.7million in fund units that were due to Imam-Sadeque based on his work years earlier.

Imam-Sadeque was head of sales for the UK, Middle East and Australia for BlueBay, one of Europe’s largest specialist managers of fixed-income credit and alternative products, managing assets of more than $24billion.

He left the firm last December after agreeing a deal in July 2011 and was entitled to keep fund units worth $1.7million, according to the writ.

His gardening leave started on August 23 last year just after he accepted an offer to join Goldbridge Capital Partners as head of sales and marketing from January 3 this year, the court will hear.

BlueBay wrote to him on December 22, claiming he was in breach of their agreement by trying to poach his colleague Damian Nixon.

Imam-Sadeque says his email exchange with Nixon was innocuous and that he emailed him on August 4 last year saying, “Coffee today?” Nixon replied that he was free between 11am and 4pm and Imam-Sadeque replied, “OK, you can take me for lunch”, the writ says.

He says BlueBay also claimed he had allowed Goldbridge to issue inaccurate and misleading references to himself and other BlueBay staff, with Goldbridge saying he no longer worked for BlueBay when he did. Imam-Sadeque argues he was not aware of the Press release and was not privy to its contents.

BlueBay Asset Management said: “We regard the claim as being without merit and will be defending it vigorously.”

[Daily Mail]

By Lisa Du

Despite starting the year off on positive returns, John Paulson’s horrible 2011 is not done haunting him.

Miami-based investor Hugh Culverhouse has filed a lawsuit against Paulson and his hedge fund Paulson & Co, claiming that the firm did not conduct enough research into Sino Forest before investing in the Chinese forestry company, the Wall Street Journal is reporting. The suit is reportedly a first for Paulson after his year of losses during which his flagship fund was down nearly 50%.

Sino-Forest was one of the first blows for Paulson last year—share prices for the company plunged after Carson Block at Muddy Waters Research released a report alleging that the company was a fraud in June 2011. Although initially reports stated that Paulson may have lost over $500 million from his funds’ investment in Sino-Forest, a Paulson & Co. spokesperson told the WSJ that the hedge fund’s net loss was $100 million from Sino-Forest.

It is unclear how much in damages Culverhouse is seeking, but since the lawsuit is seeking class-action status, it may have some potential. From the WSJ: The lawsuit, which is seeking class-action status, alleges that Mr. Paulson’s firm “failed to expend the resources to conduct the proper initial due diligence into Sino-Forest’s operations,” and that the firm “failed to properly monitor” its investment.

The lawsuit also alleges “gross negligence and a breach of” the duties of Mr. Paulson’s funds to its investors.

Continue to Business Insider

By Linette Lopez

It’s getting tougher and tougher to launch a hedge fund these days. A few years ago you could start up shop with $25 to $50 million. Now, from what we’re hearing, it’s more like $100 million.

That means your fund raising has to be absolutely on point, and in that case, it’s all in the pitch. You can have marvelous ideas and a wonderful background, but if your pitch isn’t perfect you won’t have investors.

One hedge funder’s former colleague who is going through the process told us that after your pitch is through, there’s usually one question on every potential investors lips these days:

How much of your own money is going into this fund?

Investors want to know that you have a stake in the success of the fund, and a large one. That said, it’s safe to say that if you don’t have a lot of personal money, you’re not going to be able to start a fund at all. No one will invest with a hedge funder who isn’t confident enough to put their own fortune on the line.

[Business Insider]