Ex-Visium trader tells New York jury how he turned whistleblower

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By Nate Raymond | NEW YORK

NEW YORK A former trader at Visium Asset
Management LP testified on Thursday about how he turned
whistleblower and helped U.S. authorities investigate whether
the value of the holdings of one of the firm’s hedge funds had
been fraudulently inflated.

Jason Thorell, 38, took the witness stand in federal court
in Manhattan as the star witness in the securities fraud trial
of Stefan Lumiere, an ex-portfolio manager at Visium, which was
founded by Lumiere’s former brother-in-law, Jacob Gottlieb.

Thorell said Visium employees routinely sought sham quotes
from brokers to justify inflated values for debt securities, and
deviated from prices set by third-parties on a magnitude beyond
what was usual.

“It appeared to me striking,” Thorell said.

Thorell said he reported this to Gottlieb, but “overall,
they neglected to address them and were generally dismissive of
my concerns.”

Thorell said he then reported the issue to the SEC in 2013,
and soon after began working with prosecutors and the Federal
Bureau of Investigation, which asked him to covertly record
Lumiere, among others.

The testimony came in a trial that prompted the $8 billion
firm’s wind-down and charges against Lumiere and three others,
including Sanjay Valvani, a portfolio manager who committed
suicide in June after being accused of insider trading.

From 2011 to 2013, prosecutors said, Lumiere and others
schemed to defraud investors by mismarking the value of
securities held by the bond fund, causing its net asset value to
be overstated.

Thorell, who received immunity to testify, could earn a
monetary reward for cooperating, according to court papers, a
fact Lumiere’s attorneys say indicates he is participating in
the SEC’s whistleblower program.

If so, lawyers outside the case said Thorell is a rare
instance of an SEC whistleblower testifying at trial. Often,
cases settle, and the SEC does not release whistleblowers’

Created after the Dodd-Frank financial reform law’s passage,
the SEC’s whistleblower program since 2012 has issued $142
million in awards, which can be 10 percent to 30 percent of any
money the agency collects above $1 million.

In one of Thorell’s recordings played in court, at the FBI’s
suggestion, he asked Lumiere if he wanted to blow the whistle
with him, without telling Lumiere that he already had.

Lumiere then asked Thorell, who had been terminated, if he
was looking to damage Visium or obtain a reward by doing so.

“Probably both, but I really want to damage them,” Thorell

The case is U.S. v. Lumiere, U.S. District Court, Southern
District of New York, No. 16-cr-00483.

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