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Visium Insider-Trading Scheme Brought Down by Mismarking Tip

  • Former fund manager helped FBI investigators over two years
  • Cooperater could get financial reward for helping SEC probe
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What turned into one of the biggest insider-trading cases at a hedge fund in recent years started out as something entirely different: a probe into whether some portfolio managers at Visium Asset Management were mismarking securities and inflating returns.

Investigators found that was true -- one former money manager pleaded guilty June 9 and is cooperating, while another is fighting the case. They also found a more insidious plot: Visium partner Sanjay Valvani was paying a former Food and Drug Administration official to tap a colleague, still at the FDA, for an inside line on generic drug approvals.