SEC charges six in largest ever hedge fund insider-trading scheme

Date: Monday, October 19, 2009
Author: Hedgeweek.com

Billionaire hedge fund founder Raj Rajaratnam and five other top US company executives have been charged by the US Securities and Exchange Commission in connection with the largest ever hedge fund insider-trading scheme.

Rajaratnam, founder of the USD7bn hedge fund Galleon Group, plus two executives from hedge fund New Castle and three other top executives from IBM, McKinsey & Co and  the venture capital arm of Intel Corp were charged on Friday with illegal trading in a range of companies including Google, Akamai and Hilton Hotels over a period of nearly three years.

The USD20m scheme was exposed after SEC investigators used court-approved telephone wire taps for the first time in a Wall Street insider-trading case. According to Preet Baharara, United States attorney for the Southern District of New York, the case should serve as ‘wake-up call’ for Wall Street.

“This aggressive use of wiretaps is important,” he said at a news conference on Friday. “It shows that we are targeting white-collar insider-trading rings with the same powerful investigative tools that have worked so successfully against the mob and drug cartels."