Hedge Fund Manager Pleads Guilty to Securities Fraud

October 22 00:00 2011

New York, October 22 (RainbowNewsLine.com) – A Colorado hedge fund manager, Drew K “Bo” Brownstein, 35, has pleaded guilty to securities fraud Friday for his role in an insider-trading scheme in which he and others generated millions of dollars of illegal profits, as alleged by the government. He is the founder and chief executive of the hedge fund management firm Big 5 Asset Management.

This case is an example of how corporate secrets get leaked leading to illegal trades. Whereas the Justice Department estimates that his illegal trades were worth “nearly $2.5 million”, the Securities and Exchange Commission said that he generated “ill-gotten profits” of “approximately $5 million.”

As per the government’s version, Brownstein met his close friend Drew Peterson at a gym when some sensitive information was revealed by Peterson relating to the impending acquisition of a company called Mariner Energy. Peterson’s father was a Mariner director and he had confided in his son about the impending deal. The two friends speculated about who would buy the company and placed bets that the stock would rise. They won their bets after the acquisition by Apache Corp. was announced.

The government investigated the fraud and charged the Petersons and Brownstein. Clayton Peterson was recently sentenced to two years of probation, three months of home confinement and a $400,000 fine. Drew Peterson Is awaiting sentencing. Brownstein could be sentenced to between 37 and 46 months in prison. He also faces an SEC civil suit.