Tom Hardin
| Thomas C. Hardin
| |
|---|---|
| Charges: | Securities fraud; conspiracy to commit securities fraud |
| Sentence: | Time served (no prison term)
|
| Facility: | |
| Status: | Not incarcerated; sentenced to time served |
Thomas C. Hardin, known by the FBI code name "Tipper X," is a former hedge fund analyst who became one of the most prolific cooperating witnesses in the federal insider trading investigations of 2008 to 2011, the sweeping crackdown often associated with the prosecution of Galleon Group founder Raj Rajaratnam.[1] Hardin was a managing director at Lanexa Management LLC, a small hedge fund with roots in the Tiger Management network, when he traded on material nonpublic information in 2007, including tips concerning the acquisitions of 3Com Corp., Hilton Hotels, Google, and Kronos.[2] FBI agents confronted him on a Manhattan street in July 2008, and he agreed to cooperate, secretly recording conversations for nearly two years as part of the effort the government called Operation Perfect Hedge.[1][3] His cooperation contributed to roughly 20 of the approximately 80 criminal cases the investigation produced.[1] Hardin pleaded guilty in December 2009 to securities fraud and conspiracy to commit securities fraud.[4] Because of the value of his cooperation, he was sentenced in 2015 to time served and did not serve a prison term.[4][1]
Early Life and Career
Hardin grew up in suburban Atlanta and earned an undergraduate degree from the Wharton School at the University of Pennsylvania.[1][3] He began his finance career covering technology stocks at a hedge fund in Greenwich, Connecticut, before becoming a junior partner and managing director at Lanexa Management LLC, a small hedge fund connected to the network of funds seeded by Julian Robertson's Tiger Management.[1] By his own account, he was in his late twenties and building a promising Wall Street career when he began trading on inside information.[1]
Criminal Case
In 2007, Hardin made a series of trades based on material nonpublic information. The Securities and Exchange Commission alleged that he received tips from Roomy Khan, an analyst later linked to the Galleon Group case, concerning acquisitions involving Kronos, Hilton Hotels, and Google.[2] On March 23, 2007, Hardin purchased roughly $999,999 of Kronos stock after receiving Khan's tip about a pending private-equity acquisition.[3] Separately, in the trade involving 3Com Corp., inside information originated with two Ropes and Gray attorneys, Arthur Cutillo and Brien Santarlas, who tipped proprietary trader Zvi Goffer; Goffer tipped Gautham Shankar of Schottenfeld, who in turn tipped Hardin, who then traded 3Com securities for a Lanexa fund.[5] Hardin made four illegal trades in total. His personal profit was about $46,000, a figure he later said had cost him his career, while the illicit profits at his Lanexa fund exceeded $600,000.[3][2] His last illegal trade occurred in September 2007. On July 8, 2008, FBI agent David Makol approached Hardin on a Manhattan street and confronted him with evidence of the trades.[1]
Trial and Sentencing
Hardin did not go to trial. After being confronted by the FBI, he agreed to cooperate and pleaded guilty in December 2009 to securities fraud and conspiracy to commit securities fraud; his plea was kept under seal while he continued to assist investigators.[4] Under the code name "Tipper X," he wore a recording device for nearly two years, recorded phone calls and in-person meetings, and traveled to gather evidence, helping build more than 20 of the roughly 80 cases in Operation Perfect Hedge, including the prosecution of billionaire Galleon Group founder Raj Rajaratnam.[1][4] Prosecutors described his cooperation as exceptional. When he was finally sentenced in 2015, the court credited him with time served, the few hours he had spent in custody on the day of his arrest, and imposed no prison term.[4][1] In a parallel civil action, SEC v. Lanexa Management LLC and Thomas C. Hardin, No. 10-CV-8599 (S.D.N.Y.), filed November 12, 2010, Hardin consented to a permanent injunction against future securities-law violations, and Lanexa was ordered to disgorge $612,190 plus $134,607 in prejudgment interest.[2][6][5] He was also barred from the securities industry.[4]
Incarceration
Hardin was not incarcerated and served no prison sentence. The only time he spent in custody was a matter of hours on the day FBI agents took him in for questioning, and the court credited that period as time served at his 2015 sentencing. His extraordinary cooperation with federal authorities was the stated basis for his avoidance of prison, an outcome uncommon for a defendant who pleaded guilty to two felonies.[4][1]
Release and Aftermath
Hardin lost his finance job in early 2009 and, permanently barred from the securities industry, spent years out of the workforce and struggling with depression before turning to distance running and marathons as a form of recovery.[4][1] He later founded Tipper X Advisors LLC, working as a keynote speaker, corporate trainer, and board advisor on behavioral ethics, compliance, and culture risk, and has addressed more than 150 audiences, including numerous hedge funds, universities, and, in 2016, incoming FBI agents.[1][7] He wrote the book Wired on Wall Street: The Rise and Fall of Tipper X, drawing on his experience to explain how professionals rationalize their way into financial crime and how compliance cultures can prevent it.[7][3]
Frequently Asked Questions
Q: What did Tom Hardin do?
Hardin was a hedge fund manager who, in 2007, made four illegal trades based on inside information about pending corporate acquisitions, including 3Com, Kronos, Hilton Hotels, and Google. After the FBI confronted him in July 2008, he pleaded guilty to securities fraud and conspiracy to commit securities fraud and became a cooperating witness, secretly recording conversations under the code name "Tipper X."[2][1]
Q: Did Tom Hardin go to prison?
No. Because of the exceptional value of his cooperation with the FBI, Hardin was sentenced in 2015 to time served, the few hours he spent in custody on the day of his arrest, and did not serve any prison term, despite having pleaded guilty to two felonies.[4][1]
Q: Who is Tipper X?
"Tipper X" was the FBI code name given to Tom Hardin during his cooperation. As Tipper X, he wore a wire for nearly two years and helped build more than 20 of the roughly 80 cases in the government's insider trading crackdown known as Operation Perfect Hedge, one of the largest such investigations in a generation.[1][4]
Q: What is Tom Hardin doing now?
Hardin runs Tipper X Advisors LLC, working as a keynote speaker, corporate trainer, and advisor on behavioral ethics and compliance. He speaks openly about his crime and cooperation to help organizations prevent misconduct, and he is the author of the book Wired on Wall Street: The Rise and Fall of Tipper X.[7][3]
References
- ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 1.13 1.14 1.15 "He Broke the Law. He Got Caught. Then He Wore a Wire.". Institutional Investor. Retrieved .
- ↑ 2.0 2.1 2.2 2.3 2.4 "SEC Litigation Release: Thomas C. Hardin". U.S. Securities and Exchange Commission. Retrieved .
- ↑ 3.0 3.1 3.2 3.3 3.4 3.5 "Tom Hardin: Confessions of an Insider Trader". Fraud Conference News. Retrieved .
- ↑ 4.00 4.01 4.02 4.03 4.04 4.05 4.06 4.07 4.08 4.09 "Tipper X Helped Prosecute Friends in Big Insider Trading Case; Now He's a Stay-at-Home Dad". NBC New York. Retrieved .
- ↑ 5.0 5.1 "SEC v. Lanexa Management, LLC". Russell L. Forkey, P.A.. Retrieved .
- ↑ "SEC Brings Additional Charges in Its Ongoing Investigations Into Two Previously Identified Insider Trading Rings". U.S. Securities and Exchange Commission. Retrieved .
- ↑ 7.0 7.1 7.2 "Tipper X: Tom Hardin". Tipper X Advisors LLC. Retrieved .