Bloomberg News reports that it was December 2011, and the Justice Department was deep into a seven-year investigation into illegal stock tips. As authorities homed in on people at several other hedge funds over leaks from a Dell employee, agents at the Federal Bureau of Investigation began questioning the Citadel analyst about the friendship he formed with the same Dell insider.
In confidential FBI reports summarizing those interviews, agents recounted how the Citadel analyst received market-sensitive information from the Dell employee in 2008 and 2009. In one trade he told agents he made, the analyst bet against Dell after learning it would announce disappointing earnings, bringing in $5m to $6m when the company’s shares fell by more than 10%. He told agents he later discarded records.
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