Online Stock Trading - Raj Rajaratnam Arrest for Insider Dealing
Insider dealing in stocks and shares is illegal, but that doesn't stop people doing it of course. Many people believe that there is a lot of insider dealing that goes undiscovered and unpunished, but on Friday the FBI made a very high profile arrest in front of live TV cameras of Sri Lankan born billionaire Raj Rajaratnam, founder of hedge fund firm Galleon Group. Either they are trying to prove that they are finally doing something about insider dealing or they are trying to send a message to other Wall Street traders that they should be very careful about what they are getting involved in.
No doubt the message got across and there may be some very nervous traders wondering if they are going to be next.
The Justice Department has said it will use the kind of electronic surveillance measures normally reserved for organized crime, drug syndicates and terrorist organizations. It is understood that investigators had used wiretaps to build their case against Rajaratnam and ex-directors of a Bear Stearns Cos. hedge fund.
Former prosecutor Robert Mintz said “What’s very unusual is that the case is built on wiretaps. You need very specific and timely evidence of criminal activity before a judge is going to let you go up on a wiretap.”
Rajaratnam faces 13 fraud and conspiracy counts, some of them carrying 20-year maximum sentences.
Others also arrested were :-
Rajiv Goel, a director in strategic investments at Intel Capital,
Anil Kumar, a director at McKinsey & Co.,
Robert Moffat an executive at IBM Corp.
Danielle Chiesi and Mark Kurland - former officials at Bear Stearns Asset Management affiliated with the firm’s New Castle Partners, which was responsible for around $1 billion. According to prosecutors this is the biggest insider trading case involving hedge funds.
US Attorney Preet Bharara said “The defendants operated in a world of, you scratch my back, I’ll scratch your back,”
Rajaratnam’s bail was set at at $100 million, secured by $20 million in assets and guaranteed by his wife and four others. Rajaratnam, is not allowed to travel more than 110 miles from New York City.
Prosectuors asked for Rajaratnam to be held in jail pending his trial, claiming that he had “enormous incentive” to flee back to his homeland Sri Lanka, and also said that there is additional evidence. More charges against Rajaratnam may be forthcoming and the case as described as “overwhelming.”
Defense attorney Jim Walden said prosecutors are misconstruing the evidence and that the case against Rajaratnam isn’t as strong as they claim.
Chiesi's attorney Alan Kaufman said that his client was “shocked” at her arrest yesterday and will plead innocent. Kurland’s and Moffett’s attorneys also said their clients aren’t guilty.
Anil Kumar also emphatically denies the charges.
Rajaratnam and his firm are alleged to have earned from $17 million to $18 million from the fraud. He may also have become aware he was being investigated. Rajaratnam is said to have told an acquaintance he believed a former Galleon employee was wearing a “wire.” Rajaratnam also bought a ticket to London on October 14.
The SEC has also sued Rajaratnam for alleged insider trading, and said he didn’t deserve his reputation for “genius trading strategies” or “astute study of company fundamentals or marketplace trends.”
Rajaratnam graduated from the University of Pennsylvania’s Wharton School, and according to Forbes is the 559th richest person in the world, with a net worth of $1.3 billion.
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