October 21, 2011 / 8:30 PM / in 6 years

Denver hedge fund boss admits insider trading

NEW YORK, Oct 21 (Reuters) - A Denver-based hedge fund chief pleaded guilty in a New York federal court on Friday to illegally trading last year on inside information about the pending acquisition of Mariner Energy Inc by Apache Corp .

Drew “Bo” Brownstein, who controls Big 5 Asset Management LLC, admitted to the criminal charge of securities fraud by trading on the information he received from his friend, Drew Peterson. Peterson’s father, Clayton, a Mariner board member, gave it to his son. Both men have also pleaded guilty.

When the acquisition was publicly announced on April 15, 2010, Brownstein made nearly $2.5 million in profits for himself, his hedge fund and others, U.S. District Judge Robert Patterson heard while accepting the plea. The judge scheduled sentencing for Dec. 20.

Brownstein, 35, of Denver, Colorado, faces up to 20 years in prison and a maximum fine of $5 million, one of scores of insider trading cases brought by the office of the Manhattan U.S. Attorney in recent years. The case, however, is not related to the conviction of Galleon hedge fund founder Raj Rajaratnam this year and several of his associates that drew widespread public attention because of the government’s use of telephone taps.

Drew Peterson and his father, Clayton Peterson, were charged in August. Clayton Peterson was sentenced on Oct. 11 to two years’ probation with three months’ house arrest and fined $400,000. The sentencing of Drew Peterson is scheduled for Jan. 11 next year.

The case is USA v Peterson et al, U.S. District Court for the Southern District of New York, No. 11-00665.

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