The government is reportedly close to filing charges in the largest institutional insider-trading investigation in history.

According to initial reports, the investigation could ensnare Wall Street's biggest names: Goldman Sachs, SAC Capital, Wellington, Jennison, MFS Global, Maverick, Citadel, and others.

The investigation reportedly focuses on "expert networks" -- consulting firms that pay industry participants to share insights and information with investors. Professional investors use these networks to gather information about real-time business conditions and trends in various industries

No matter where the investigation ends up, the government will likely present it as a huge step toward making the market "fair" for small investors.  And the same small investors will likely view it as confirmation that the "game is rigged."

Both of these conclusions will miss a far more important point.

The REAL lesson most investors should take away from the largest institutional insider-trading investigation in history is that competition in the global financial markets is so intense that it's basically idiotic to trade.

Trading is what is known as a "zero sum game." To win, you have to beat the competition.

In our experience, most investors have no appreciation for how intense their competition is. They think, "Wow--look at all this information I have.  Look at all my trading screens. Look at all my SEC filings. Look at my charts and graphs. Look at the smart fellow on TV telling me what to buy. Look at how many of my trades have made money!"

What they miss is that their competition has all this information, too -- so it doesn't give anyone an edge. They also don't understand that, in addition to all this information, the folks they are competing with have millions and millions of dollars to spend gathering information that will never be published anywhere or appear on an screen or chart or graph.

That's where the expert networks come in.  That's where contact networks in general come in.  That's where one-on-one meetings with managements and suppliers come in.

One glance from a CEO in response to a pointed question can contain more information than 500 pages of SEC filings. One nugget of scuttlebutt about the status of an important contract can make you more money than 500 hours of studying charts and graphs.  Most small investors don't understand that their competition gets this sort of information all day long.

A businessman who authorities describe as a repeat offender in securities fraud was arrested Friday and charged with overseeing a $17 million Ponzi scheme.

Robert Stinson Jr. of Berwyn fleeced more than 260 investors over the past four years while claiming to operate several real estate hedge funds, according to a federal indictment.

The funds boasted returns of up to 16 percent a year, but authorities allege that Stinson diverted most of the money for personal use, including expensive cars, meals and vacations.

Some investors who received "dividends" from funds managed by Stinson's company Life's Good Inc. were actually paid using money from new clients, the indictment said.

Stinson also lied to investors about having degrees from the Massachusetts Institute of Technology and Penn State University, and falsely claimed big experience in currency trading, investment management and other businesses, authorities said.

In addition, Stinson concealed previous fraud convictions and two bankruptcy filings, according to the indictment. He was also the target of fraud
complaints by the Securities and Exchange Commission in 1990 and this past June.

On June 29, the FBI raided several of Stinson's business locations and seized two Mercedes bought with proceeds from the alleged scheme. Stinson then obstructed justice by wiring money out of Life's Good accounts, authorities said.

Jeffrey Skilling, the former Enron Corp. chief executive officer convicted of leading a fraud that destroyed the world’s largest energy trader, is seeking a new trial over government objections.

A three-judge panel of the New Orleans appellate court is reviewing verdicts today against Skilling after the U.S. Supreme Court determined in June that prosecutors used an invalid legal theory to convict him.

Skilling is serving a 24-year sentence in a Colorado federal prison after he and former Enron Chairman Kenneth Lay were found guilty of deceiving investors about the company’s true financial condition.

“The court doesn’t act as a 13th juror” to decide Skilling’s guilt or innocence, his lead lawyer Daniel Petrocelli told the panel. “If the trial record contains evidence on which a rationale juror could’ve acquitted, that count must be reversed. Here, the record is filled with acquittal evidence.”

A class-action lawsuit filed by Century 21 franchisees against Century 21 Real Estate Corp. and parent company Cendant is moving forward following a decision of the New Jersey Appellate Division.

In August, New Jersey Superior Court Judge Robert J. Brennan certified a class of current and former Century 21 franchisees in a lawsuit alleging breach of contract and other claims against their franchisor, Century 21 Real Estate Corp., as well as its parent company, consumer and business services provider Cendant Corp. Currently, Century 21 is owned by Cendant spin-off Realogy Corp.

Following Judge Brennan’s ruling, Cendant asked the New Jersey Appellate Division to reconsider the class certification decision. On October 15, 2010, the appellate court announced it would not hear the appeal, which clears the way for the case to go to trial.

“We are pleased that the case will now move forward as originally directed by Judge Brennan,” says attorney Dan Drachler of Zwerling, Schachter & Zwerling, who represents the franchisees along with firm co-founder Robert S. Schachter.

“As a result of Cendant’s actions, Century 21 franchisees have suffered damages that may total in the hundreds of millions of dollars,” says Mr. Schachter.

According to the lawsuit, Cendant failed to provide the level of services to Century 21 franchisees required by their agreements. Additionally, the lawsuit claims that contributions to a national advertising fund, which topped more than $40 million annually, were misappropriated and diverted to uses other than the benefit of Century 21, including the promotion of Century 21’s Cendant-owned real estate competitors. Shortly after the purchase of Century 21, Cendant also acquired Coldwell Banker and ERA.

Judge Brennan’s order certified a class of current and former Century 21 franchisees during the period from August 1995 to April 2002 whose franchise agreements contain a New Jersey jurisdiction clause.

The franchisee plaintiffs also are represented by New Jersey-based Keefe Bartels LLC and the Fort Lauderdale, Fla., office of Adorno & Yoss.

Zwerling, Schachter & Zwerling, LLP, represents clients nationwide in financial-related class-action lawsuits. With offices in New York City; Garden City, N.Y.; and Seattle, the firm currently plays a leading role in numerous major securities and complex commercial litigations pending in federal and state courts. To learn more, please visit the firm’s website at http://www.zsz.com.

A class-action lawsuit was filed Monday in a federal court in San Francisco accusing FarmVille creator Zynga of "illegally sharing the Facebook user data of its customers with advertisers and data brokers."

In a statement released by the lawsuit's co-lead attorneys, the filing claims Zynga violated federal law and its contract with Facebook by sharing the user data of players on games such as Farmville.

"This appears to be another example of an online company failing the American public with empty promises to respect individual privacy rights," said Michael Aschenbrener of Edelson McGuire LLC -- a co-lead attorney for the lawsuit -- in a statement.

The lawsuit seeks "monetary relief" for those affected as well as an injunction to "prevent continued privacy abuses," reads the statement.