- Thomson Reuters
A family member of Leon Cooperman tried to blow the whistle on trades that the relative described as “fishy.”
That’s according to the Securities and Exchange Commission, which on Wednesday charged Cooperman and his $5.5 billion hedge fund, Omega Advisors, with insider trading.
The trading involves a company called Atlas Pipeline Partners, according to the SEC complaint.
The SEC does not identify the relative, but says they are a hedge fund manager.
Cooperman’s son Wayne runs the hedge fund Cobalt Capital Management, which has held positions in Atlas. Business Insider has reached out to Wayne Cooperman but has not received a response.
In a letter Cooperman senior sent to investors Wednesday, Cooperman denied the allegations and wrote that his son is prepared to testify in his defense.
According to the SEC, Leon Cooperman spoke to an Atlas Pipeline Partners executive and learned about an upcoming transaction. On the same day, he purchased close to 2,000 options to acquire shares of the company, and later added more call options and a position in the company’s bonds.
He later sent an email to a relative letting them know about the transaction – a day before it was officially announced. When the deal was announced, the family member sent an email to an APL executive flagging “some fishy options trades in apl before this that somebody should investigate,” according to the SEC.
“How do I become a whistle blower,” the relative asked, according to the SEC.
Here’s how it played out, according to the SEC:
- “Cooperman spoke with APL Executive 1 on the telephone on July 7, 19 and 20, 2010. During these telephone conversations, APL Executive 1 informed Cooperman that APL was negotiating the sale of Elk City and Cooperman asked APL Executive 1 questions about the Elk City sale. In at least one of these conversations, APL Executive 1 told Cooperman that APL was selling its Elk City facility for approximately $650 million.” “On July 7, 2010, at Cooperman’s and Omega’s direction, the Cooperman Offshore Account, Hedge Fund Accounts and Managed Accounts purchased a total of 1,966 APL call options with a strike price of $15.00, expiring August 21, 2010. The call options purchases accounted for over 90% of the day’s trading volume in that option series. On July 7, 8 2010, APL’s stock price closed at $9.66, and the call options the Cooperman Offshore Account, Hedge Fund Accounts and Managed Accounts purchased were significantly out-of-the-money.” “At Cooperman’ s and Omega’s direction, the Cooperman Offshore Account, Family Accounts, Hedge Fund Accounts and Managed Accounts continued to purchase APL securities between July 21 , 2010 and July 27, 2010. The chart below reflects these purchases:”
- “On July 27, 2010, at approximately 8:36 p.m. EDT, Cooperman sent an email to a family member, who also was a hedge fund manager, stating: Good news on APL … [t]hey sold their ELK City operation for $682mm which will enable them to pay off bank debt, de-risk company because keep whole contracts largely gone and fund their Laurel Mountain obligations. We think stock worth at least $15 in near term—for what that is worth.” “Cooperman’s family member forwarded this email to a colleague who replied, in part: ‘That explains the fishy $17 August calls, etc. I still haven’t come across any press release – want to see how it’s discussed …’ Cooperman’s family member responded: ‘Somebody should investigate that.'” “On July 28, 2010, at approximately 6:59 a.m. EDT, APL publicly announced for the first time that it was selling Elk City for $682 million. As a result, on that day, APL’s stock price increased approximately 31% and other APL-related securities greatly increased in value.” “After APL announced the Elk City sale, Cooperman’s hedge fund manager family member emailed APL Executive 3 twice, complaining about APL options activity prior to the public announcement of the Elk City sale, stating: Can you please call me[?] Been trying to get you last few days[.] [T]here had been some fishy options trades in apl [sic] before this that somebody should investigate.” “I also would like to make sure that the sec [sic] looks into the shady option trades and volume in apl [sic] last 2 weeks or so in front of this deal[.] How do I become a whistle blower[?]”