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Posts Tagged ‘racketeering’

Wiretaps on Wall Street

Posted by Larry Doyle on October 26th, 2009 11:11 AM |

“Leave the gun, take the cannoli.”

The world of organized crime evokes thoughts of payoffs, extortion, racketeering, and wiretaps. Are regulators now utilizing tools previously relegated to infiltrating the backroom dealings of the underworld to discover illegal activities on Wall Street? Yes, they are.

The news that regulators are now employing wiretaps to investigate financial frauds on Wall Street is sending a chill through Wall Street in general and hedge funds in particular. Why do regulators feel the need to utilize wiretaps?

Recall from the SEC’s and FINRA’s own internal reviews of their handlings of the Madoff and Stanford frauds that the regulators were woefully deficient in tracking and stopping these frauds. One of the greatest regulatory deficiencies highlighted is the use of technology.

Many hedge funds have spent millions upon millions of dollars on technology. These tools allow these funds to move with cat-like quickness in allocating capital and seizing investment opportunities. As we are learning, not all of these movements would seem to have been executed in a legal and ethical fashion.

How quickly can the regulators move to develop the necessary technical capabilities to track hedge fund activities? Don’t hold your breath.

Jules Kroll addressed the capabilities of the regulators relative to the tools employed by hedge funds on a Bloomberg interview this morning. Prior to my sharing Mr. Kroll’s assessment of the regulators’ capabilities, who is Jules Kroll? He recently founded a new firm, K2 Global Partners, which will look to “provide specialized risk services and solutions” to a wide array of global clients. (more…)

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