Remarks of FBI Assistant Director Joseph M. Demarest at11/5/09 press conference on hedge fund insider trading case.Shortly after the announcement of charges in the Galleon casethree weeks ago, the financial press began reporting about ananticipated second wave of arrests. The arrests and chargesannounced today should not be viewed as the other shoe dropping.No one should assume that our aggressive policing of the hedge fundindustry – now publicly disclosed – will stop at two cases. This is anongoing process.The defendants we arrested today – 5 here in New York, 1 inConnecticut, 1 in New Jersey, and 1 in California – carried out severalinsider trading conspiracies that cumulatively reaped tens of millions inillegal profits. They traded on – and in some instances traded – insideinformation.Material, non-public information provides such a competitiveedge – albeit one it’s illegal to exploit – that it was itself a tradablecommodity. Several of these defendants bartered inside informationfor inside information from others.Trading on inside information is like betting on a game when youalready know the outcome. The profits can be sizable and sudden:

•

For example, in the account of defendant Craig Drimal, shares of stock in 3Com, Axcan and Hilton were purchased during shortperiods in 2007 preceding public announcements of thecompanies’ acquisitions. In each case, the stock was soldimmediately after the announcement, at an aggregate profitexceeding $8 million.These investigations present challenges: the subjects aregenerally smart, capable people; they know the industry, so they know– or think they know – how to avoid detection. Several of the