Leon Cooperman’s Hedge Fund with $5.4b AUM Charged with Insider Trading

Omega Advisors has sent a note to clients denying the allegations and stating that “it has done nothing improper”.

Leon Cooperman’s hedge fund Omega Advisors, Inc. has been charged with insider trading by the U.S. Securities and Exchange Commission (SEC). The news comes as a big surprise for the industry as Cooperman is a renowned asset manager and one of the founders of Goldman Sachs Asset Management.

The hedge fund, which as of the 31st of August had $5.4 billion in assets under management, has been losing investors in recent quarters as the value of the funds in its custody was closer to $6.7 billion as of the end of last year, which was yet lower by a quarter than the amount reported at the end of 2014.

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we have done nothing improper and categorically deny the SEC’s charges

The fund has been expecting a steady return for its investors in 2016 in the aftermath of the Brexit debacle that sent stocks lower initially. With the latest turmoil the company is under risk of hemorrhaging money. The company may also be forced to liquidate some of its positions due to the difficult situation it is in.

The SEC alleges that Leon G. Cooperman and his firm Omega Advisors have been basing some trade decisions on material nonpublic information. The regulator stated in its official announcement on the matter that the source of the leak against the hedge fund is a corporate executive.

Atlas Pipeline Partners

The stock which was allegedly traded by Cooperman and his fund illicitly is Atlas Pipeline Partners (APL). The information about the sale of a certain natural gas processing facility is claimed to have been leaked to the hedge fund manager by an executive at the firm. As a result
Cooperman and Omega Advisors are claimed to have accumulated positions in the stock.

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Shares of the company have spiked higher by 31 per cent after the news with a subpoena issued to Cooperman and Omega Advisors a year and half after the APL trade. The corporate executive who could have served as a whistleblower in this case is said to have reacted vigorously to the news that Cooperman traded before the official news release.

SEC Looking for a Permanent Injunction

Commenting on the matter, the Director of the SEC’s Division of Enforcement, Andrew J. Ceresney, stated: “We allege that hedge fund manager Cooperman, undermined the public confidence in the securities markets and took advantage of other investors who did not have the material information.”

According to the SEC complaint, Cooperman is also charged with “failing to report material information about holdings and transactions in securities of publicly-traded companies that he beneficially owned.”

The SEC alleges that the hedge fund manager has violated federal securities laws, over 40 times on this count.

The company sent a letter to investors stating that it has not been engaged in illegal activity and that it will be defending itself vigorously. The letter reads “we have done nothing improper and categorically deny the SEC’s charges.”

The SEC is looking for disgorgement of ill-gotten gains, penalties and a permanent injunction against Cooperman and Omega Advisors.

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