March 20, 2015 / 11:20 AM / 4 years ago

Ex Moore Capital trader jailed in UK's largest insider dealing probe

LONDON (Reuters) - A former trader at U.S. hedge fund Moore Capital was sentenced to 19 months in jail by a London court on Thursday after becoming the third man to plead guilty in Britain’s largest insider dealing investigation.

Julian Rifat, dubbed “the face of Moore Capital” by investigators, is one of the most high-profile professionals charged in connection with an eight-year inquiry codenamed Operation Tabernula — the latin word for tavern.

The investigation, named after London bars such as The Rack and Tenter, The Crispin and The Gable in which the spoils of illegal trading were divided, is part of a crackdown on a crime that UK regulators only began prosecuting in 2009.

Rifat, who was arrested on his 41st birthday five years ago and pleaded guilty last November, passed on confidential, market moving tips gathered from the Moore Capital’s London offices to former broker Graham Shelley via text messages on unregistered pay-as-you-go mobile phones.

Shelley, who worked for Novum Securities, traded for their joint benefit in a scam that generated more than 250,000 pounds ($368,250), bought Rifat a 15,000 pound luxury family holiday and organised a 48,500 pound payment for a Range Rover.

Insider dealing investigations are notoriously lengthy and tough to prove. But some evidence jumped out.

In an email to travel agents Trailfinders, Rifat wrote: “You will be getting a phone call from a person called Graham Shelley who will be paying for our holiday in full to Oman...”

The FCA said Rifat passed on confidential information about eight companies in 2009, including UK bank Barclays, German carmaker Volkswagen, Spanish power group Iberdrola and German retailer Metro.

Rifat, who was given credit by the judge for his guilty plea, was also fined 100,000 pounds and ordered to pay costs of almost 160,000 pounds.

JAILED

Shelley pleaded guilty last year to insider dealing with Rifat and Paul Milsom, a former trader at the investment arm of insurer Legal & General.

Shelley received a two-year suspended sentence, partly because of his previous good character and poor health. As an insider, Milsom was sentenced to two years in jail and fined 240,000 pounds in 2013 after also pleading guilty.

The sentence for Rifat, a former senior execution trader, is a boon for the FCA, which has won 27 criminal convictions for insider dealing with sentences of up to four years since 2009.

This is dwarfed by a U.S. crackdown on Wall Street, although lawyers expect that a U.S. court decision last year to overturn two convictions and narrow the crime’s definition will slow a run of cases that featured traders at some of the country’s leading hedge funds and alarmed trading rooms.

FCA case manager Ken O’Donnell and forensic investigator Richard Littlechild led a team of up to 30 to hunt down suspects after being alerted to suspicious trading patters in 2007.

In March 2010, regulatory investigators and a squad of 143 police officers made the first arrests and seized documents and computers. It took months to compile a detailed chronology, cross-checking phone records, text messages, emails, hand-written notes and other documents.

“There are no short cuts,” O’Donnell told a news briefing. “Mistakes mean collapsed trials.”

Six others, including a former Deutsche Bank managing director, are charged over a separate alleged conspiracy under Operation Tabernula and face trial in Jan 2016.

Insider dealing is a criminal offence in Britain and can be punishable by a fine and a jail sentence of up to seven years.

($1 = 0.6585 pounds)

Reporting by Kirstin Ridley, editing by Sinead Cruise and Elaine Hardcastle

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