Describing it as the “largest hedge fund insider trading case” ever, federal authorities charged billionaire Raj Rajaratnam and five business executives Friday with conspiracy and securities fraud.
Rajaratnam, listed as number 236 on the Forbes list of richest Americans, is the founder of Galleon Group hedge fund. A native of Sri Lanka, he began his investment banking career at Needham & Co., and founded Galleon in 1997.
“He is not a master of the universe,” SEC enforcement director Robert Khuzami said at a news conference. “He is a master of the Rolodex.”
Also charged Friday were two employees of New Castle Funds, a former hedge fund of Bear Stearns Asset Management; an employee of Intel’s investment arm; a director at McKinsey & Company; and a senior vice president at IBM.
The six are accused of illegally raking in millions of dollars by trading on insider information regarding publicly traded companies such as Google, Polycom, Hilton, Akamai, Advanced Micro Devices and Clearwire.
Law enforcement officials based their case on phone taps and recorded conversations involving a government informant. The unnamed informant told authorities that the defendants routinely traded inside info on earnings forecasts, mergers and acquisitions, and other business transactions.
Sources of the information allegedly included insiders at Polycom, Moody’s and Market Street Partners.
In a parallel case, the Securities and Exchange Commission accused Rajaratnam and his company of making more than $25 million from the ilegal trades.
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