Circle of Friends: The Massive Federal Crackdown on Insider Trading---and Why the Markets Always Work Against the Little Guy Hardcover – July 2, 2013

This is a very good book. Extremely well written, very informative, and yet relatively easy to follow the story. Great job!

A well-written account of how cheating made it so easy for some Wall Streeters make a killing.....all at the expense of small investors. Unlike some accounts of Wall Street intrigue when an understanding of the structures of various instruments is essential, the author focuses on the people....because how they profited on inside information is incidental to the gist of the story ....how they obtained and passed along inside information. If you like to read about scoundrels...this book is for you.

Gasparino has written a thorough, comprehensive review of the federal government’s efforts to deal with insider trading – the use of ill begotten non-public information to buy or sell securities which, when the information becomes publicly available, will rise or decline in price. He notes that while prostitution is considered the oldest profession, insider trading has to be at the top of the list of the world’s oldest economic crime.In the aftermath of the Great Depression, during which insider trading was very prevalent and regarded as a fact of life, President Franklin Roosevelt chose as the person to clean things up, someone who had profited handsomely from securities speculation. Joseph P. Kennedy, the father of President John Kennedy. Kennedy was chosen to be the head of the newly created Securities Exchange Commission that administered the Securities Act of 1933 and the Securities Exchange Act of 1934. Section 10(b) of the 1934 Act made it unlawful to use or employ, in connection with the purchase or sale of a security, “any manipulative or deceptive device or contrivance in contravention of” rules and regulations of the SEC. The principal such rule was Rule 10(b)(5).But it was several years before the Rule was widely used and its parameters defined by the Supreme Court. Although the SEC can only initiate civil actions, federal law enforcement officials, such as U.S. Attorney Rudy Giuliani, used criminal statutes to go after high profile investors who used misappropriated inside information.Gasparino goes into considerable detail about criminal insider trading cases in the last fifteen years. Much of his reporting follows the work of two teams of FBI agents who tried to induce suspects to become informants. Their work was made easier when the courts authorized wiretaps of phone conversations.Gasparino’s reporting indicates that insider trading was much more prevalent than I had thought. Thanks to Cameron Funkhouser of the Financial Industry Regulatory Authority, computer tracking systems can flag instances of unusual trading and can “find nearly any questionable stock sale no matter how seemingly insignificant.”The book traces the work done by authorities to convict Raj Rajaratnam, the head of the Galleon Group, and Rajat Gupta, the former head of McKinsey. Gasparino covers some of the same ground, but from somewhat different perspective, as Anita Rachavan in her excellent book The Billionaire’s Apprentice. Rachavan focused on the rise and fall of Rajaratnam and Gupta, as Indian-Americans, and the work of Indian-Americans Sanjay Wadwa, assistant regional director of the SEC’s New York office, and Preetinder Bharara, the US attorney for the Southern District of New York who worked to convict Rajaratnam and Gupta. Gasparino is somewhat less complimentary of Bharara.Several pages of Circle of Friends describe efforts by the federal government to convict Steve Cohen of SAC Capital, a hugely successful hedge fund. A number of former employees of SAC have been found guilty of insider trading but the government has been unsuccessful in obtaining information sufficient to convict Cohen. According to Gasparino, “nearly 100 SAC trades [were] flagged by FINRA as suspicious.” The government was hopeful that a former SAC employee who obtained advance information about a medical report and has been charged with insider trading would enter into a plea agreement and reveal the substance of a phone conversation with Cohen shortly before the allegedly illegal trading began but the employee has refused. The statute of limitations for this trading episode will shortly expire and within recent days news reports say Cohen will not be charged.Gasparino is clearly frustrated that the government has devoted so much time and money to combat insider trading but has not successfully prosecuted any the of people who were responsible for the financial collapse in 2008 that required a massive bailout.

Charlie sure knows all the crooks on Wall Street. I enjoy seeing him for 5 minute spots on FOX occationally. But when it comes to his latest book, I quickly became bored to death. Name after name after ever-living name is dropped to show how all these crooks are connected and how Chalie has figured them all out. After a chapter or two, you will get his points. First of all, the line between legally acting on "public" information and illegally acting on "insider" information is a bit blurry. Second, the government is too busy trying to bust these relatively low rent crooks when they themselves have created the biggest boom/bust cycle in the history of the world.I knew a couple of these names. In fact I worked for one of them. After seeing his name a couple times, I could say "I know that guy". BFD.Look for better books on what the government is doing to prop up the current economy to defer the inevitable crash they will have caused if you want to read a real story about big time crooks.

This is an interesting read. Well researched, well sourced.in my view, the key point in Mr Gasparino's book was the idea of a cost-benefit analysis - the cost of the investigation against the return on that investment. I don't think it is clear that insider trading pursuit and prosecution is necessarily worth the effort.but we'll never know because the Government doesn't do that sort of analysis. It responds to popular opinion in most cases.I read the Kindle version, so the following comments might not apply. I'd like links to the DOJ and Court documents. And I'd like them included in the hard copy versions of the book.most of all, I would like a follow-up volume by Mr Gasparino on the further developments, as well as a best guess on a cost-benefit analysis.Cheers!

A very well researched look into the small group of individuals who networked between major financial houses and cost the Country greatly in terms of trust, income and investment savings. Names, Dates, Institutions and inside deals are all clearly identified for the reader. Charley knows his stuff when it comes to the little known facts surrounding the near collapse of some of our large Investment firms.

Charles GAsparino is at his peak in this book. His last several books have broken new journalistic ground. Digging into the horror of how Wall Street is really played no one should consider investments until you have read this book.. Well written and the facts are there to support the story line. This is an important book.

Charles Gasparino did a wonderful job of painting the story how the Feds went after Rajaratnam, and got him, threatening the underlings with serious jail time, getting them to agree to wear wires and other bugging procedures. Once this was done, the Feds got all of the necessary information to convict Rajartnam and many other of his minions.

Charles Gasparino is a master of the art of investigative financial journalism, as has been evidenced by his previous books such as 'King of the Club', 'The Sellout', 'Bought and Paid For', 'Blood on the Street', and now this excellent exposé of insider trading 'Circle of Friends'.In his normal way, the author has researched this subject extensively and his book allows the reader to take a ringside seat to 'view' the tawdry, avarice driven activities undertaken by people in all levels of the investment market, including ancillaries such as printers, typists, and even taxi drivers, who seek to cash in on early non-public information on companies either with financial results or with probable corporate machinations. Any thing in fact that is likely to affect a company's share price, that will enable a fast buck to be made by acting in advance of the 'uninformed' market.Many individual stories of insider trading are related and told in the most interesting manner, and which leaves the reader amazed at the ingenuity, deviousness, guile and cunning of those prepared to risk their freedom for personal fiscal enhancement.However, running throughout the book is the worrying thought that, whilst devoting huge resources convicting inside traders is important, the Regulators have not invested the same resources, or determination in pursuing miscreants, of whom there were many, in the Banking industry. Among a whole litany of dubious trading activities such as credit default swaps, most if not all went unaddressed, as if the financial crisis,(which had far wider dire financial consequences for the whole world than ever did insider trading, and a huge dip into the pockets of taxpayers), had never happened. Many 'insider' convictions have been obtained but not single major bank chief has been charged in a financial-crisis-related crime. One must deduce that just as the 'too big to fail' tag that was given to the Banks, became 'too big to sue' as well, resulting in high level bank executives getting away with 'daylight robbery', and long prison sentences. It does not need too much intellect to conclude that politicians and regulators, intimidated those whose monetary contributions did not match those of the 'Wall Street' Boys.Despite the crackdown on insider trading, the irony is that the Regulators will never, ever stop this practice, because to a certain extent those particularly down the hierarchal ladder, probably don't realise that they are breaking the law. And those at the top of the ladder are blinded by the intense glare of wealth and riches.A very good book - highly recommended.