(Bloomberg) -- Tom Hardin, the ex-Lanexa Global Management trader referred to as “Tipper X” in court papers in the Galleon Group insider-trading case, and a second man pleaded guilty and agreed to cooperate with the government’s probe, U.S. prosecutors said today.
Hardin pleaded guilty in federal court in New York to conspiracy and securities fraud on Dec. 21, according to a plea agreement and criminal information unsealed today.
Franz Tudor, a former Galleon trader, pleaded guilty on Oct. 29, 2009, to conspiracy and securities fraud, according to his plea agreement, which was also unsealed today.
Both men face as long as 25 years in prison, prosecutors in the office of Manhattan U.S. Attorney Preet Bharara said in court papers. Prosecutors will submit letters to the judge who sentences the men, asking for leniency based on the level of cooperation both provided in the government’s probe, according to the plea agreements.
Larry Krantz, a lawyer for Hardin, declined to comment. Edgardo Ramos, a lawyer for Tudor, didn’t immediately return a voice-mail message seeking comment after regular business hours today.
More than 20 people have been charged in two overlapping insider trading cases involving Galleon Group founder Raj Rajaratnam. Hardin and Tudor are the 13th and 14th people to plead guilty, with most of those agreeing to cooperate with prosecutors and testify against others.
SEC Lawsuit
Hardin, a former managing director at hedge fund investment adviser Lanexa, also was sued today by the U.S. Securities and Exchange Commission. The SEC said in an e-mailed statement that insider trading involving two takeovers and an earnings announcement produced profits at Lanexa of more than $950,000.
In separate complaints, the SEC said it sued Hardin, Lanexa and Tudor, who had also been a trader at Schottenfeld Group LLC, for insider trading involving acquisitions producing profits of about $715,000.
“When greed leads hedge funds and other market professionals to illegally trade on inside information, the SEC will take aggressive action,” Robert Khuzami, director of the SEC’s enforcement division, said in the statement.
Rajaratnam was arrested in October 2009, accused of earning millions of dollars from stock trades made with inside information from corporate officials and hedge fund executives.
Google, Kronos
Hardin traded securities of Hilton Worldwide Inc., Google Inc. and Kronos Worldwide Inc. based on “material nonpublic information” that he allegedly received from Roomy Khan, the SEC said in the statement. According to the criminal information, Hardin got tips from Khan and also from Gautham Shankar, a former trader at Schottenfeld Group, who pleaded guilty and is cooperating with prosecutors.
Khan, a former Intel Corp. executive, last month agreed to pay $1.9 million including interest to settle the SEC’s case against her. She pleaded guilty in a related criminal insider trading case and is cooperating with the government in a bid for leniency.
The criminal cases are U.S. v. Thomas Hardin, U.S. v. Franz Tudor, 09-cr-01057, and U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan). The civil case is SEC v. Galleon, 09-cv-08811, U.S. District Court, Southern District of New York (Manhattan).
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