The top U.S. securities regulator on Wednesday charged billionaire investor Leon Cooperman with insider trading, making him the highest-profile target in years in Washington's ongoing crackdown on illegal trading at hedge funds.
The U.S. Securities and Exchange Commission said Cooperman's trades earned roughly $4 million when his fund Omega Advisors invested in Atlas Pipeline Partners six years ago, before it sold a gas processing facility. Cooperman was a big shareholder in the company and used his position to obtain confidential information about the sale that other investors did not know about, the agency said in its civil case.
Cooperman, 73, denied any wrongdoing. "We have done nothing improper and categorically deny the Commission's allegations," he said in a five-page letter sent to investors, a copy of which was seen by Reuters.
The charges are likely to put more pressure on Cooperman, one of the hedge fund industry's best-known traders, and his $5.4 billion fund which has been losing assets recently. Two years ago Omega Advisors oversaw $10.7 billion. The government is seeking permanent injunctions against Cooperman and his firm.
The billionaire who grew up in the Bronx first informed investors in March that he might face charges, after he received a notice from the government.
On Wednesday he also cautioned that the U.S. Attorney's Office for the District of New Jersey, which has been investigating the matter, has not completed its probe but is not pursuing charges at the moment.
In its case, the SEC said "Omega Advisors allegedly accumulated APL securities despite explicitly agreeing not to use the material nonpublic information for trading purposes." APL was bought by a unit of Targa Resources Corp <TRGP.N> in early 2015.
Cooperman, the government said, had trimmed the firm's position in APL in the first half of 2010 and called it a "shitty business" on July 7, 2010. Later that day, however, after a telephone call with an APL executive, Cooperman began buying more shares, the government said.
"By doing so, he allegedly undermined the public confidence in the securities markets and took advantage of other investors who did not have this information," Andrew Ceresney, the SEC's director of enforcement, said in a statement.
The SEC also said Cooperman violated federal securities laws more than 40 times by failing to report the stocks he owned in a timely manner.
Cooperman is the government's most prominent target since it began cracking down insider trading among hedge fund managers about seven years ago, when it arrested billionaire Raj Rajaratnam. The Galleon Group founder is now serving an 11-year prison sentence.
Three years ago, Steven A. Cohen's SAC Capital Advisors pleaded guilty to insider trading but Cohen was personally never charged.
Cooperman, the son of a plumber in the Bronx, has ranked among America's most highly respected investors for decades. He founded Omega in 1991 after spending years at Goldman Sachs. As a prominent hedge fund manager, he has often appeared on television talking about his stock picks and at industry conferences where attendees paid thousands to dollars to hear his advice.
Some of his biggest winners included bets on publisher Gannett Co. Inc. and Brazilian healthcare provider Qualicorp SA.
While Omega lost 35.2% in 2008 during the financial crisis, the fund came rocketing back with a 52.6% gain in 2009.