FBI uses Twitter, social media to look for securities fraud

Mon Nov 26, 2012 11:34am EST
 
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By Matthew Goldstein and Jennifer Ablan

(Reuters) - The FBI sees social media as a potential breeding ground for securities fraud, and has agents scouring Twitter and Facebook for tips, according to two top agents overseeing a long-running investigation into insider trading in the $2 trillion hedge fund industry.

April Brooks, a special agent in charge of the New York field office of the Federal Bureau of Investigation, and David Chaves, a supervisory agent, said it is hard to predict the next wave of securities fraud, but they add that it will have a lot to do with advances in technology and social media.

"I will tell you technology will play a huge part, social media, Twitter. Any kind of technology that is new and doesn't exist today, if there is any way to exploit it, these individuals will exploit it," Brooks told Reuters TV in an interview for the Reuters Investment Outlook 2013 Summit.

Brooks and Chaves oversee what the FBI calls "Operation Perfect Hedge," which has led to more than 60 convictions of hedge fund traders, analysts and industry consultants.

Last Tuesday, a day after the Reuters TV interview, the government charged a former employee of Steven A. Cohen's SAC Capital, Mathew Martoma, with a $276 million insider trading scheme that prosecutors called "the most lucrative" ever.

While Cohen, whose $14 billion hedge fund is one of the most successful and best known on Wall Street, was not charged with any wrongdoing, the complaint says he signed off on trades in Elan Corp and Wyeth in July 2008 ahead of bad news about a clinical drug trial the companies were working on.

Brooks and Chaves gave no hints about the SAC case in the interview, and declined to talk about active investigations.

"Some view insider trading as reaching this crescendo, and we have reached a top. I would suggest we have not," Chaves said.   Continued...

 
The main headquarters of the FBI, the J. Edgar Hoover Building, is seen in Washington on March 4, 2012. REUTERS/Gary Cameron