5.5.2009 In the SEC’s continued trend to bring enforcement actions against hedge funds, the SEC filed its first insider trading action involving credit default swaps against two individuals—Jon-Paul Rorech and Renato Negrin. The complaint alleges that Rorech learned inbankers about a change to a proposed bond offering that was expected to increase the price of the credit default swaps (CDS) on those bonds. Deutsche Bank was the lead underwriter for that proposed bond offering. According to the SEC’s complaint, Rorech illegally tipped Negrin about the contemplated change to the bond structure, and Negrin then purchased CDS for a Millennium hedge fund. When news of the restructured bond offering became public in late July 2006, the price of the CDS substantially increased, and Negrin closed Millennium’s CDS position at a profit of approximately $1.2 million.

Click http://www.sec.gov/news/press/2009/2009-102.htm to access the SEC’s press release.formation from Deutsche Bank investment