Nineteen charged in $8.4m AOL chatroom insider-trading scam
Who says bulletin boards are bad for you?
Nineteen people have been charged with using an AOL chatroom to make $8.4 million through an insider-trading scam. The scheme was masterminded by a part-time computer graphics employee, hired to work nights at Goldman Sachs and Credit Suisse in New York. After the rest of the office had gone home, John Freeman would rifle through litter bins and workers' desks to gain top secret information. It is also alleged he used his word-processing work to access non-public information on merger and acquisition plans. The 34-year-old pleaded guilty to stealing information on 23 deals and passing tips to investors through the AOL online chat-room. He also shared tips with his wife and a neighbour, as well as ex-workmates at Manhattan bistro, Les Halles, where he previously worked as a waiter. The profiteering scheme is alleged to have been used by a total of 19 people over a period of two years. They include a teacher, film producer, actor, accountant, waiter and a dentist. Two of the defendants were obviously impressed with the glamour of the stock market. They took to trading information in accounts under the name of "Blue Horseshoe Investments" – after the code name for insider trader used by Michael Douglas in Hollywood blockbuster Wall Street. Others had bizarre payment schemes for Freeman - who ironically made the least cash from the scheme, between $70,000 and $110,000. Some sent cash enclosed in unsigned birthday cards, while another showed his thanks via a couple of cases of wine. "I breached my duties to Goldman Sachs and CS First Boston [by] passing along this confidential information," Freeman told Judge Barbara Jones yesterday. "I expected to receive a percentage of the profits." Manhattan US Attorney Mary Jo While described the case, the first where the Internet was used for in-trading on non-public tips, as "insider trading millennium-style". In addition to yesterday's criminal charges, the defendants face civil fraud charges from the Securities and Exchange Commission.® Related stories Compaq sued over insider-trading allegations Corel chief charged with insider dealing Mirror editor in Viglen share-deal row/a>