The Federal Bureau of Investigation Thursday night arrested one of the most vocal critics of the government’s dragnet against insider trading on Wall Street.
John Kinnucan, an independent technology sector analyst, gained notoriety in 2010 for publicly decrying the government’s attempt to pressure him to record calls with his hedge fund clients.
The arrest arose from allegations that Kinnucan participated in insider-trading. Specifically, he was charged with two counts of securities fraud and two counts of conspiracy, according to Reuters. He was also charged in a civil case with insider trading by the Securities and Exchange Commission.
Kinnucan has always claimed that he was engaged in legal and legitimate research.
Kinnucan had run Broadband Research, a small expert network company that supplied investors with research and intelligence about technology companies. His list of clients included some of the biggest hedge funds in the country, including Citadel, SAC Capital and Maverick Capital.
FBI agents approached Kinnucan while he was sipping wine on the porch of his home in Portland, Oregon. He would later claim that they accused him of passing inside information to his clients and threatened to arrest him. They then asked him to tape record calls with a client.
Kinnucan refused to cooperate. Instead, he sent an email to clients warning them of the investigation.
"Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information," Kinnucan wrote. "(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web."
In the months that followed, Kinnucan became something of a media sensation. He granted dozens of interviews to various media organizations, including CNBC, and spoke both on and off the record to scores of journalists. He was hailed by some as a hero for standing up to federal authorities and described by others as a “schmuck.”
Later, his communications grew stranger, and included expletives and racial epithets targeted at specific law enforcement personnel, daring them to arrest him.
Kinnucan received a subpoena from the government a week or so after the visit from the FBI. He told CNBC’s NetNet that he did not have a lawyer and was concerned whether he could afford one. Without a lawyer, we noted, Kinnucan risked legal jeopardy even if he believed he was complying with the subpoena.
Kinnucan claimed in July 2011 that the FBI was targeting him for prosecution and began warning associates that he expected the FBI to pressure them into cooperating in a case against him.
Around this time, Kinnucan began sending emails to a group of people that included a number of well-known journalists, including CNBC's NetNet. They typically included a news article about financial or economic events and his commentary.
When the article was about the government’s insider trading dragnet, his commentary included harshly critical words about federal authorities.
“For prosecutors, wiretaps can be a two-edged sword: They can show guilt, but they can also prove innocence. Unfortunately for Preet and his stupid [expletive deleted] FBI agents, they tried to play me for the fool, but instead I have been making fools out of them,” one early message said, referring to Preet Bharara, the US Attorney leading the insider trading probe.
In September 2011, Kinnucan’s emails took a turn to the bizarre. Many still were comments on financial markets but some were laced with racial epithets and accusations of sexual misconduct aimed at federal authorities. Some of the emails were so offensive that they are basically unprintable. In one, addressed to Assistant US Attorney Avi Weitzman, Kinnucan wrote: “People like you make me think that Hitler was right after all.”
Other emails would accuse federal officials of pedophilia and engaging in a variety of non-conventional sex acts.
In one widely circulated email addressed to a number of media outlets, Fortune contributing editor Duff McDonald objected to Kinnucan’s comments. Kinnucan retaliated by sending profanity-laden, homophobic and sexually oriented emails and making a number of phone calls to McDonald’s house. Kinnucan accused McDonald of working for the government.
“Anyways Duff, I know it’s not always easy being a government bitch, so if I can do anything to help, such as sending some diapers for you, please let me know,” one email said.
Kinnucan also made threats against government officials, according to the Wall Street Journal.
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