Billionaire Among 6 Charged With Hedge Fund Insider Trading Today... Keep Rounding Them Up!

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Billionaire Among 6 Charged With Hedge Fund Insider Trading
written by David Faber
Friday October 16, 2009 at 2:53 PM ET

The US attorney has charged six people, including Raj Rajaratnam, founder of the $3 billion New York hedge fund Galleon Group, with securities fraud and insider trading involving more than $20 million in illegal profits, according to US prosecutors and the FBI.

It is the largest hedge fund insider trading case ever criminally charged, according to Preet Bharara, US Attorney for the Southern District of New York.

The alleged insider trading case occurred among hedge funds Galleon Technology, New Castle and Intel Capital, regarding the stocks of Google, Polycom, Hilton Hotels, Sun Microsystems, Advanced Microsystems and International Business Machines, according to the complaint.

One complaint alleges Rajaratnam conspired with Rajiv Goel of Intel's Treasury and Anil Kumar, a director at McKinsey & Co consulting, from January 2006 to 2008, with the majority of the charges occurring in 2006 and 2007.

On or about Jan. 12 Rajaratnam purchased 60,000 shares of Polycom for Galleon Technology Funds, a complaint said. It said in July 2007 he bought 400,000 shares of Hilton Hotels for Galleon and about 1,000 put options in Google and arranged to short about 25,000 shares of Google stock.

Rajaratnam and Goel conspired from at least March 2008 to October 2008, the complaint said. Rajaratnam purchased 125,800 shares of Clearwire Corp on March 24, 2008.

A co-conspirator made a phone call to Rajaratnam on July 24, 2008 and the next day Rajaratnam sold short about 138,550 shares of Akamai Technologies stock, a complaint alleged. Also as part of the purported scheme, Rajaratnam and Kumar conspired to buy 2.1 million shares of Advanced Micro Devices.

In a statement, Galleon said it was shocked to learn of Rajaratnam's arrest, and that it had no knowledge of the investigation before it was made public. It contines to say that it intends to cooperate fully with the relevant authorities. that it continues to operate and is highly liquid.

In one conversation about a pending deal that was described in a criminal complaint, Chiesi is quoted as saying: "I'm dead if this leaks. I really am. ... and my career is over. I'll be like Martha (expletive) Stewart."

Stewart, the homemaking maven, was convicted in 2004 of lying to the government about the sale of her shares in a friend's company whose stock plummeted after a negative public announcement. She served five months in prison and five months of home confinement.

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