As the expert network insider trading investigation moves along, most people assume federal investigators were angling to charge more hedge fund executives. No one was surprised when two hedge fund managers were arrested on insider trading charges and a another manager and analyst agreed to plead guilty.

Speculation has been rife that the ultimate target of the probe is SAC Capital, though neither that company nor any of its executives have been charged. It's unclear if any of the arrested were targeted for activity involving SAC.

One of the arrested hedge fund executives was Donald Longueuil, who previously worked for SAC. The other was Sam Barai, head of Barai Capital Management, notes Reuters. Barai's arrest was expected. His fund was one of four raided by federal agents late last year, which put the hedge fund industry on notice.

The defendants who agreed to plead guilty were Noah Freeman, a former analyst at Sonar Capital in Boston and then a portfolio manager at SAC Capital, and Jason Pflaum, an analyst who worked with Barai.

The big question is how many more hedge fund executives are in line to be arrested--or turned. I doubt the prosecutors will stop here. Plenty of hedge fund execs are worried and have lawyered up. Another big issue is whether the arrests signal a deal to turn the defendants into witnesses has gone sour. You do get the feeling that all of this is leading up to bigger fish.

For more:
- here's the Reuters article

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