Pequot & CEO Settle With SEC for $28M

HARTFORD (CN) - Pequot Capital Management, a hedge fund manager, and its CEO Arthur Samberg will pay nearly $28 million to settle charges of inside trading in Microsoft stock, the SEC said. The SEC said it is pursuing its case against the alleged tipper, former Microsoft employee David Zilkha, in a separate administrative action.

"The cases have two particularly troubling aspects - a hedge fund manager trading on illegal insider information, and his tipper source who withheld crucial information about the scheme during an SEC investigation," SEC enforcement divisions Robert Khuzami said in a statement.

The SEC claims that Samberg asked Zilkha for information in April 2001, as rumors spread that Microsoft would not hit its earnings estimate. Zilkha had just accepted an offer to leave Microsoft and work for Pequot, the SEC says. Zilkha told Samberg the rumors were false, Pequot acted accordingly, and when Microsoft announced on April 19 that it had beat its earning estimate, Pequot made more than $14 million, the SEC says.

Pequot and Samberg agreed to disgorge $18 million in profits and interest, and $10 million in fines.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit