Authorities arrested a group of high-powered hedge fund moguls and tech executives in an insider trading ring today, the Wall Street Journal reports. They were tripped up after an informant came to the FBI. Phone taps followed. Today, the U.S. attorney and the SEC in New York charged the six with insider trading.
The man at the center is hedge fund manager Raj Rajaratnam, founder of Galleon Group, a New York fund that has $3.7 billion under management. But Silicon Valley executives were also caught up in the alleged conspiracy: Rajiv Goel, an executive in chip giant Intel’s treasury department, was charged, as was Anil Kumar, a consultant at McKinsey who lived in Saratoga, Calif.
The SEC alleges that the ring made off with $25 million in illicit gains by trading on inside information. In the case of Goel, the SEC alleges that:
Goel provided inside information to Rajaratnam about certain Intel quarterly earnings and a pending joint venture concerning Clearwire Corp., in which Intel had invested. Rajaratnam then used this information to trade on behalf of Galleon. As payback for Goel’s tips, Rajaratnam, or someone acting on his behalf, executed trades in Goel’s personal brokerage account based on inside information concerning Hilton and PeopleSupport, which resulted in nearly $250,000 in illicit profits for Goel.
And about Kumar, the SEC says:
Kumar obtained inside information about pending transactions involving AMD and two Abu Dhabi-based sovereign entities, which he shared with Rajaratnam. Rajaratnam then traded on the basis of this information on behalf of Galleon.
With a more aggressive SEC, it’s back to the 1980s, as the WSJ notes, when a huge insider trading scandal centered around hedge fund manager Ivan Boesky shook Wall Street.
— Zusha Elinson