BNP Paribas, Deutsche Bank and Moore Capital all are connected to the biggest-ever, "insider trading" raid ever conducted in the United Kingdom. On Tuesday March 23rd 2010, British regulators and the UK Serious Organized Crime Agency used more than 140 personnel to raid sixteen locations and initially arrest six people.

The identities of the six arrested are a bit sketchy still. One is said to be Clive Roberts, head of European sales trading at Exaine, in which BNP Paribas owns a fifty percent stake. At least one of those arrested was also employed at Moore Capital in London – supposedly a Mr. Julian Rifat. Another individual is said to be a junior employee at Deutsche Bank. The identities and affiliations of the other three arrested were not initially known.

According to a subsequent FSA press conference, Exaine, Moore Capital and Deutsche Bank employees apparently used inside information to trade for their firms and/or themselves, and have made significant profits as a result. This again apparently was a 'sophisticated and long running insider trading ring. The UK investigation began back in 2007 and is continuing.

Toomre Capital Markets LLC ("TCM") first wrote about the use of credit default swaps ("CDS") as a means of insider-trading back in October 2006 in the post Possible Insider Trading Using Credit-Default Swaps?? On May 5th 2009, the Securities and Exchange Commission finally filed its first case alleging that credit-default swaps were used to facilitate illegal insider-trading activities. Hopefully, this will be just the first of many such cases filed involving the abuse of insider information and the credit default swap market.

According to this story on Bloomberg News written by David Scheer, the SEC has now alleged that a Deutsche Bank AG salesman, one Jon-Paul Rorech, 36, passed on information about a pending bond sale to a now former Millennium Partners LP money manager, one Renato Negrin, 45, who then bought credit default swaps that resulted in profits of $1.2 million once the VNU high-yield bond transaction was formally announced. The securities market regulator wants these two individuals to forfeit "unlawful trading profits" and pay unspecified fines. “Rorech and Negrin checked their integrity at the door and schemed to engage in insider trading of CDS to the detriment of investors and our markets,” Scott Friestad, the SEC’s deputy enforcement director, said in the statement announcing the lawsuit.

The TCM blog entry “Stainton leaves Deutsche as CDO co-head to lead Citadel energy business??” has been unusually popular the past few days. Perhaps the news story out of London in Times Online entitled “Deutsche suspends trader over £30 million 'cover-up'” by Patrick Hosking might be an explanation.

The beginning of the article reads “A LONDON-based derivatives trader at Deutsche Bank has been suspended after allegedly covering up a shortfall of at least £30 million, The Times has learnt. The trader, Anshul Rustagi, has been ordered to stay away from the bank, pending a disciplinary hearing next week. He is alleged to have overstated profits on his own trading book, according to a Deutsche investigation, which was launched as soon as discrepancies became apparent. The full size of the alleged abuse is not known because of the esoteric nature of the derivatives that Mr Rustagi traded. Known as collateralised debt obligations (CDOs), they can be very hard to value. CDOs, once famously labelled “toxic waste” by Sir Howard Davies, the former chairman of the Financial Services Authority, have become very big business for investment banks.”

According to the publication CreditFlux.com, a top credit correlation trader, Mark Stainton, has quit Deutsche Bank purportedly to head the energy trading group at Citadel Investment Group. According to that publication, “Deutsche Bank has confirmed that Mark Stainton, global co-head of the bank's combined cash and synthetic CDO business, has resigned. Deutsche confirms that Stainton, who is one of the best known figures in the credit correlation market, is joining investment management firm Citadel. Based in London, Stainton was the key figure behind Deutsche's global correlation and exotics credit trading activities.