Details On the Raj Rajaratnam SEC Insider-Trading Case

Today, billionaire hedge fund manager Raj Rajaratnam was arrested on insider-trading charges. The SEC filed a formal complaint in court alleging that Rajaratnam tapped into his network of friends and close business associates to obtain insider tips. Below are some details about the alleged charges:

• An unnamed source, identified in the SEC’s complaint as Tipper A, obtained inside information about earnings announcements at Polycom (NASDAQ: PLCM) and Google (NASDAQ: GOOG), as well as a takeover announcement of Hilton. Tipper A then allegedly provided this information to Rajaratnam, who used it to trade on behalf of Galleon.
  
• Goel provided inside information to Rajaratnam about certain Intel (NASDAQ: INTC) 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.
  
• Kumar obtained inside information about pending transactions involving AMD (NYSE: 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.
  
• Chiesi obtained inside information from an executive at Akamai Technologies and traded on the information on behalf of a New Castle fund, netting a profit of approximately $2.4 million. Chiesi also passed on the inside information to Rajaratnam, who then traded on behalf of Galleon.

The SEC also alleges that IBM Senior Vice President Robert Moffat provided inside information to Chiesi about Sun Microsystems (NASDAQ: JAVA). Moffat obtained the information when IBM was contemplating acquiring Sun. Chiesi then allegedly traded on the basis of this information on behalf of New Castle, making approximately $1 million in profits.

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